Big Tax Move: Foreign Investors Derivative Profits Under Scrutiny

Indian tax officials recently asked two foreign portfolio investors (FPIs) in Mauritius to pay taxes on profits from equity derivatives. They claim these derivatives are tied to actual shares, so the profits should be taxed in India. The Dispute Resolution Panel (DRP), which resolves tax disputes, supports this view.

This decision worries FPIs from countries with tax treaties with India, like Mauritius and Singapore. These treaties often give tax benefits, but officials now suggest equity derivative profits may not be covered. Tax experts warn this could lead to more tax demands, impacting investment choices.

The situation is still unfolding, and its effect on future investments remains uncertain. FPIs and tax professionals are watching closely, as the outcome could shape India’s appeal as an investment hub.