India has amended its double taxation agreement (DTAA) with Singapore to prevent double non-taxation and mitigate revenue losses owing to tax evasion on capital gains.

The revised agreement, which will be effective from 1 April 2017, will provide for source based taxation of capital gains arising on transfer of shares in a company as opposed to the present DTAA that supports residence based taxation of capital gains of shares in a company, the Indian finance ministry said.

The amended agreement also grandfathers  investments in shares made before 1 April 2017, as well as allows for a two-year transition period from 1 April 2017 to 31 March 2019 during which capital gains on shares will be taxed in source country at half of normal tax rate.

In addition, the agreement now includes provisions to support relieving of economic double taxation in transfer pricing cases. 

“This is a taxpayer friendly measure and is in line with India’s commitments under Base Erosion and Profit Shifting (BEPS) Action Plan to meet the minimum standard of providing Mutual Agreement Procedure (MAP) access in transfer pricing cases. The Third Protocol also enables application of domestic law and measures concerning prevention of tax avoidance or tax evasion,” the finance ministry said.

Last year, India also signed revised tax treaties with Mauritius and Cyprus.

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