There will be no free ride for those wanting to invest in India throughquasi equity investments such as convertible debentures via Mauritius under the recently amended treaty between the two countries, officials said. Those holding such instruments would do well to convert them into shares before April 1, 2017, to enjoy the exemption on capital gains tax, or grandfathering, that’s available until then.
“The date of acquisition will be the date on which an entity or individual comes to own shares and not the date on which investment in the instrument was carried out,” said a finance ministry official. Tax experts said this interpretation will have an adverse impact on PE firms.
Stating that private equity firms commonly use convertible instruments for greater flexibility on returns and control, tax experts called for a formal circular to clarify the position.