How rich used to abuse tax treaties with Singapore, Malaysia….

Here’s Mr Vallya…..He had accumulated tons of crores of wealth in India….Now he wants to reinvest this wealth in indian share market...He believes Sensex to scale new highs this year(i too believe)....Ache Din Ane Wale Hain…..

So, he transfers money to Singapore/Malaysia/Cyprus(SMC)….

How does he do it?? There’s various channels such as inflated invoices, payment to shell companies overseas, the hawala route and so on…

The money reached there goes to some offshore fund, which are set up in Singapore/Malaysia/Cyprus…..There are very less formalities in these SMC nations to set up an offshore fund…

How does this money return to India?? The offshore fund in turn invests in indian stock market…

But Why??? Why to take such a pain of round tripping of funds through SMC nations….Here’s lie the answer….

“Capital gain earned on equity shares is exempt if investment is made through SMC nations….This is due to treaty which India has signed with these SMC nations”

So because of the treaty, Mr Vallya and others like him used to take advantage of these SMC nations to save on their capital gain tax….

So can u also do?? Or, can they continue to do??

Hmmmmm….NOOOOOO………

India has amended its tax treaties with these SMC nations in recent past….Now as per the amendment, capital gain will be taxable in India….The offshore fund of Mr Vallya will be liable to pay capital gain tax as per the rates applicable to domestic investors….