Luxembourg, France gain heft among FPIs investing into India

Luxembourg has dislodged Mauritius to become the region with the third-largest assets under custody. Its AUC grew 30 per cent last year to ₹4.85 lakh crore, with its equity assets now second only to the US.

Investments from Mauritius dipped nine per cent to ₹3.9 trillion during the year amid greater regulatory oversight on the island nation. The tax treaty between India and Mauritius was renegotiated a few years back post which capital gains on sale of shares was made fully taxable after April 1, 2019.

Since 2020, Luxembourg’s prominence has increased following virtual meetings between European and Indian leaders, resulting in three financial agreements to bolster trade relations, according to experts. Out of more than 3,000 FPI accounts from Europe (excluding the UK), approximately 1,400 originate from Luxembourg.

“For holdings less than ten per cent, capital gains might not occur in India upon such transfers. Investors may want to benefit from these favourable provisions in the DTAA,” said SuperNAV’s Kulkarni.

Ireland and Norway have both moved up one position, now ranking fifth and seventh, respectively, among the jurisdictions.

Ireland is popular because of its tax efficiencies and global reach. Irish’s regulated funds are exempt from Irish tax on income and gains derived from their investments.

Canada slipped one place even as its AUC grew 19 per cent year-on-year. It is unclear if the diplomatic row between India and Canada has, in any way, impacted investments.

“We see more inflows coming from France, Luxembourg and Cyprus going forward,” said PMC’s Kulkarni.

Source:-  The Hindu Business Line