A further step towards implementation of the renegotiated double tax avoidance agreement between Cyprus and India has taken place with the announcement that the Indian Cabinet has approved the document. This follows an earlier announcement that negotiations at the official level had been successfully concluded.(1)
As was widely expected following similar changes to India's double tax agreements with Mauritius and Singapore, the revised agreement provides for source-based taxation of gains from the alienation of shares. However, investments undertaken before April 1 2017 are grandfathered, with taxation rights over gains on the disposal of such shares at any future date remaining solely with the state of seller's residence.
When the amended agreement enters into force, the Indian authorities will rescind the classification of Cyprus as a notified jurisdictional area under Section 94A of the Indian Income Tax Act 1961, with retrospective effect from November 1 2013.