Foreign VCs, FPIs with Tax Residency Certificate to avoid capital gains tax hit: report

Recent developments provide hope for many foreign portfolio investors (FPIs), offshore venture capital funds and corporates from Mauritius, Singapore and the Netherlands to be able to avoid capital gains tax on earlier investments in Indian stocks as long as they have tax residency certificates (TRC) from these jurisdictions. In a recent ruling, the Income Tax Appellate Tribunal (ITAT) struck down the IT department's argument that MH India (Mauritius), a company in Mauritius, was simply a conduit for its parent based in the Netherlands from which it had borrowed funds to buy shares in India. Also, the Supreme Court had held that the provision in the double taxation avoidance agreement would prevail over the general provisions contained in the IT Act.