The Indian government has closed a loophole which allowed funds with exposure to India to avoid paying a 15 per cent capital gains tax by trading through a Mauritian subsidiary.
In March, the Indian government announced it is scrapping a taxation treaty with Mauritius, which allowed foreign investors to access the Indian market free of tax.
A number of UK fund managers with exposure to India trade through Mauritius.
Ocean Dial’s £26.4m India capital growth fund invests in India via a Mauritian subsidiary.
Managing partner David Cornell says: “The Indian government is under a lot of pressure from foreign trade bodies to reverse the decision. We are waiting to see how things develop.”
The £1.7bn Fidelity India focus fund invests in India through a Mauritian subsidiary. A spokeswoman says: “We are awaiting final details on the tax changes.”
Gemini Asset Management’s £10m Gemini MOSt India fund also trades through a Mauritian subsidiary.
Managing director Stuart Alexander says: “The change is not good news for investors in terms of returns.”