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Singapore has replaced Mauritius as the top source of foreign direct investment into India, accounting for about 25% of FDI inflows in 2013-14.
During the last financial year, India attracted $5.98 billion in FDI from Singapore, whereas it was $4.85 billion from Mauritius, according to the data of the Department of Industrial Policy and Promotion (DIPP).
According to experts, the Double Taxation Avoidance Agreement (DTAA) with Singapore incorporates Limit-of-Benefit (LoB) clause which has provided comfort to foreign investors based there.
"LoB clause in India-Singapore treaty justifies the substance in Singaporean entities, bringing certainty and avoiding chances of litigations," head of tax and expert on FDI with corporate law firm Amarchand & Mangaldas Krishan Malhotra said. FDI inflows from Mauritius have started drying up on fears of the impact of GAAR and possible re-negotiation of the tax avoidance treaty, he added. PTI