FAQ: Fdi Structuring India

For a new investment (not one predating April 2017), Mauritius and Singapore no longer shield capital gains from Indian tax — that benefit was removed by treaty amendments in 2016-2017. UAE currently offers capital gains taxed only in UAE with zero India withholding, making it the more relevant option for gains-focused structuring, though Mauritius still has a lower dividend withholding rate.  Read full answer →

Most sectors allow 100% FDI under the automatic route with no prior government approval; a smaller set of sectors (including defence, media, and certain financial services) cap the permitted foreign stake or require government approval above a threshold, and a few remain restricted or prohibited.  Read full answer →

GIFT City/IFSC offers a genuine tax holiday (100% profit deduction for 10 of the first 15 years under Section 80LA) for eligible units, but the benefit is specific to certain financial-services and fund activities — it isn't a general-purpose substitute for an overseas holding jurisdiction for every business.  Read full answer →

Dividends can generally be repatriated from an India subsidiary without a separate RBI approval, since dividend payment on equity shares is under the automatic route — but Indian withholding tax applies at the point of payment, at a rate that depends on the applicable tax treaty.  Read full answer →

Mauritius requires roughly ₹27 lakh (about USD 45,000) in annual local operating expenditure to meet the Limitation of Benefits test; Singapore's threshold is SGD 200,000. These are ongoing costs, not one-time setup costs.  Read full answer →

GAAR targets arrangements whose main purpose is obtaining a tax benefit without genuine commercial substance — a holding structure with real local operations, staff, and decision-making is far less exposed than a shell entity used only to access treaty rates.  Read full answer →