India, Cyprus Ink new Agreement

India signed a revised double taxation avoidance agreement (DTAA) with Cyprus, an official statement said in New Delhi.

NEW DELHI: "A revised agreement between India and Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (DTAA) with respect to taxes on income, along with its protocol, was signed today (Friday) in Nicosia (Cyprus)," said the Finance Ministry statement.

The revised agreement will replace the existing agreement signed in June 1994 with Cyprus, which has a reputation as a tax haven.

It was signed by High Commissioner of India to Cyprus Ravi Bangar and Cyprus' Finance Minister Harris Georgiades.

"The new DTAA provides for source based taxation of capital gains arising from transfer of shares, instead of residence based taxation provided under the existing DTAA," the statement said.

"However, a grandfathering clause has been provided for investments made prior to 1st April, 2017, in respect of which capital gains would continue to be taxed in the country of which the taxpayer is a resident," it added.

Provisions of new DTAA will enter into force after the completion of necessary internal procedures in both countries and is expected to come into effect in India in respect of income derived in fiscal years beginning on or after April 1, 2017.

"The new Agreement also updates the provisions related to exchange of information to accepted international standards, which will enable exchange of banking information," the Indian finance ministry said.

Cyprus was the only country to have been blacklisted by India as a non-cooperative jurisdiction, due to lack of effective exchange of information.

India and Cyprus had entered into a tax treaty in 1994, and are obliged to exchange information.

On November 1, 2013, the Indian government had notified Cyprus as a non-cooperative jurisdiction following failed discussions to secure the desired level of cooperation.