India: Revised India-Singapore Tax Treaty: Decoding The Third Protocol

Pursuant to the signing of the third protocol (Protocol) amending the India-Singapore Tax Treaty (Treaty) on 30 December 2016, the text of the Protocol has now been officially released by the Government of Singapore. We previously reported key changes of the Protocol basis the press release issued by the Ministry of Finance, Government of India in our Ergo Newsflash dated 2 January 2017. In furtherance, detailed amendments based on the text of the Protocol are set out below:

Applicability of "Mutual Agreement Procedure" to Transfer Pricing

The article on "Associated Enterprises" under the Treaty has been amended to provide that a corresponding adjustment to the income/profits of an enterprise of one contracting state would be made when an addition is made in the income of its associated enterprise in the other contracting state. In determining such adjustment, due regard shall be had to the other provisions of the Treaty, and the competent authorities of the contracting states shall consult each other, if necessary.

Source based Taxation of Capital Gains restricted to Transfer of "Shares"

The Protocol only introduces source based taxation of capital gains arising from the alienation of "shares" of a company. A residuary clause in the Protocol provides that the gains arising from the alienation of any other property shall continue to be taxed only in the state of residence. Therefore, it is now clear that gains arising from the transfer of other capital assets such as debentures, partnership interests etc., and gains from an indirect transfer of Indian company shares in a two-tiered Singapore structure would continue to remain outside the taxability net even after 1 April 2017, subject to the satisfaction of the "general anti-avoidance rules" (GAAR).

Modification to Time Limit in "Limitation of Benefits" Article

Under the present Treaty, and as retained in the Protocol, an entity is not entitled to the capital gains tax exemption in the source state if its affairs were arranged with the primary purpose to take advantage of such benefits. Similarly, shell or conduit companies, viz., resident legal entities with negligible or nil business operations, or with no real and continuous business activities, are disentitled from availing the capital gains exemption in the source state.

The aforementioned conditions of the primary purpose test under the "Limitation of Benefits" (LOB) article have also been made applicable to entities seeking to claim benefit of the 50% lower tax rate under the Protocol during the transition period from 1 April 2017 to 31 March 2019 (Transition Period).

The expenditure thresholds and corresponding temporal limits to avail of the capital gains exemption on investments made prior to 1 April 2017 continue to remain the same in the Protocol, i.e., an annual expenditure of at least S$ 200,000 in Singapore or INR 5,000,000 in India on operations in each of the two blocks of 12 months in the immediately preceding period of 24 months from the date on which the gains arise.

To avail of the 50% lower tax rate under the Protocol during the Transition Period, while the expenditure thresholds remain the same, the corresponding temporal limit has been revised to the immediately preceding period of 12 months from the date on which the gains arise.

Applicability of Domestic Law and Measures

The Protocol specifically provides that the Treaty shall not prevent a contracting state from applying its domestic law and measures concerning the prevention of tax avoidance or tax evasion.

Entry into Force

Both India and Singapore are required to notify each other upon completion of the procedures required by their domestic law to bring the Protocol into force. The Protocol shall enter into force on the date of the later of these notifications. If as on 31 March 2017, the Protocol does not enter into force due to either of the notifications remaining pending, then the Protocol shall enter into force on 1 April 2017.

Khaitan Comment

While the transfer of capital assets other than shares, such as debentures, partnership interests etc., and an indirect transfer of Indian assets would continue to be tax exempt under the Protocol even after 1 April 2017, and would not be subject to the LOB test, such transactions will nevertheless be required to pass the muster of GAAR (i.e. the domestic anti-abuse tax law of India). The express inclusion of the applicability of domestic law and measures concerning the prevention of tax avoidance or tax evasion has perhaps been made to pave way for the implementation of GAAR, given that the same provides for treaty override. Such a provision has not been included in the revised Tax Treaty with Mauritius, but has been seen in certain other Tax Treaties such as that with Luxembourg.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions