Finance Ministry on Wednesday said India will continue to attract investments because of the inherent strength and the return it offers to investors.
Amid concerns on how markets will react to the decision taken by India to tax capital gains from Mauritius, Economic Affairs Secretary Shaktikanta Das said international community is moving away from countries with zero tax regime.
"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 return that India offers post tax," Das said.
Reacting to the bilateral treaty, market benchmark BSE Sensex plunged over 377 points in early trade on Wednesday but later trimmed the initial losses to trade 103.14 points lower at 25,669.39.
The amendments to the tax treaty with Mauritius provide India the right to impose capital gains tax on shares sold in Indian companies post April 2017.
Besides, capital gains tax will be imposed at 50 per cent of the prevailing domestic rate.
Full rate will apply from April 2019.
"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," Das said.
He further said capital gains is taxed world over.
An investor should not get special advantage vis-à-vis domestic investors just because money is coming through a particular route.
"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.
The image is used for representational purpose only. Photograph: Reuters
