Given below are two statements, one is labelled as Assertion (A) and the other as Reason (R).

Assertion (A): During 2023 - 24, Singapore emerged as the largest source of FDI to India.

Reason (R): The India - Mauritius Tax Treaty amendment has brought a major shift in countries as major sources of FDI to India.

Select the correct answer from the codes given below:

Question

Question

This question was previously asked in

UPPSC PCS Prelims 2024 Official GS Paper-I

Answer 1

The correct answer is Option 2

Key Points

Both (A) and (R) are true, and (R) is the correct explanation of (A).
Assertion (A): During 2023-24, Singapore emerged as the largest source of FDI to India.
- True. In the financial year 2023-24, Singapore accounted for the highest FDI equity inflow to India, valued at over 11 billion US dollars.
  Statista
Reason (R): The India-Mauritius Tax Treaty amendment has brought a major shift in countries as major sources of FDI to India.
- True. The amendment to the India-Mauritius Double Taxation Avoidance Agreement (DTAA) introduced source-based taxation on capital gains from shares acquired on or after April 1, 2017.
- This change reduced the attractiveness of routing investments through Mauritius, leading investors to prefer alternative jurisdictions like Singapore.
  Squire Patton Boggs
Link between Assertion and Reason:
- The amendment of the India-Mauritius Tax Treaty altered the tax implications for investments routed through Mauritius, making it less favorable for investors seeking to minimize tax liabilities.
- Consequently, many investors shifted their investment routes to other countries with more favorable tax treaties, such as Singapore. This shift contributed to Singapore emerging as the largest source of FDI to India during 2023-24.