India and Singapore will discuss changes to their bilateral tax treaty, paving way for New Delhi to tax Singapore-based equity investors on profits on their investments in India.

The two countries are expected to amend the bilateral Double Taxation Avoidance Agreement (DTAA) on the lines of India’s bilateral treaties with Cyprus and Mauritius, officials said. Finance minister Arun Jaitley will hold talks with Singapore’s deputy prime minister Tharman Shanmugaratnam to conclude the protocol to amend DTAA to modify capital gains tax exemption.

Shanmugaratnam will be in New Delhi on December 30 and 31. This will be his third visit to the country this year. In August he had delivered the inaugural NITI lecture series on Transforming India.

India-Singapore DTAA, which came into force in 1994, has been amended twice — in 2005 and 2011. India has now benchmarked the treaty to the one with Mauritius.

The treaty renegotiations are in line with discussions between Prime Minister Narendra Modi and his Singapore counterpart Lee Hsien Loong in October. The deliberations are likely to extend beyond the tax treaty.

Singapore occupies a key place in India’s external economic engagement and the Act East Policy, and the two countries have a number of strategic partnerships.

Modi in his talks with Lee had suggested a working group chaired by senior ministers to explore ways to further strengthen bilateral economic ties and accelerate investment flows between India and Singapore.

Singapore is already the second largest source of FDI in India with cumulative FDI inflow amounting to $50.6 billion, or about `3.5 lakh crore, between April 2000 and September 2016.

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