Forex

That is a good question. FIIs have been ducking taxation thanks largely to the Indo-Mauritius tax treaty which vests the latter with the power to impose capital gains tax on gains made in the Indian bourses. But ironically there is no capital gains tax in Mauritius which many experts allege has cleverly played dog-in-the-manger with the Indian government.

There is a view that what FIIs earn should not be brought to tax as capital gains but as business profit. Even this route has been foiled because it requires a permanent establishment in India under treaties to bring a foreigner to tax in India on account of business income. The FIIs have got away by saying that they have no permanent establishment in India.