Trying to calm markets, the Finance Ministry on Wednesday expressed optimism that India will continue to attract investments due to its strong economic fundamentals and the returns it offers to investors.
“India continues to be a robust economy and investments will come in because of fundamentals of the economy and because of the strength and resilience of the economy and returns that India offers post tax,” said Economic Affairs Secretary Shaktikanta Das.
His comments come after India and Mauritius agreed to plug a major loophole in the Double Tax Avoidance Agreement that would allow India to impose capital gains tax on shares sold in Indian companies post April 2017.
However, the move has sparked concerns among investors and domestic bourses had reacted sharply.
Noting that capital gains is taxed the world over, Das said, “The international community is moving away from harmful tax practices like having such tax jurisdictions with zero tax. India obviously is one of the major vocal advocates of this policy of doing away with such tax jurisdictions, because they promote harmful tax practices, which is not in the interest of the global community.”
An investor should not get special advantage vis-a-vis domestic investors just because money is coming through a particular route, he stressed.
“Tax policies will have to be predictable, there has to be certainty,” Das said, adding that the government has grandfathered investments up to March 2017.
“Markets have so far given a very matured response after it opened today. And the market, I think has understood the situation,” Das said.