Union Cabinet clears India’s DTAA with Cyprus
Q. Union Cabinet cleared a DTAA with which nation/s for source based taxation of capital gains on transfer of shares instead of one based on residence?- Published on 25 Aug 16a. Cyprus
b. Mauritius
c. Both of the above
d. Neither of the above
ANSWER: Cyprus
Union Cabinet cleared a new India-Cyprus Double Taxation Avoidance Agreement providing for source based taxation of capital gains on transfer of shares instead of one based on residence.
- Cabinet approved the revised DTAA and it was agreed to provide to provide for source based taxation of capital gains on transfer of shares. A grandfathering cause will be provided for investments made prior to April 1, 2017 in respect of which capital gains would be taxed in the country where the taxpayer resides.
- India and Cyprus have a DTAA since 1994 and the foreign nation is a major source of foreign funds flow in the country. From April 2000 till March 2016, India received foreign direct investment to the tune of INR 42,680.76 crore from Cyprus. Completion of negotiation on avoidance of double taxation and prevention of fiscal evasion has paved the way for the removal of Notified Jurisdictional Areas respectively from November 2013.
- India also took this as a major step in the fight against tax evasion, base erosion and profit shifting.
