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Funds hit as India shuts CGT loophole

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.”

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