Indian corporations are more and more leveraging low-tax jurisdictions overseas to channel their international investments in a bid to improve their world presence, in accordance to information in addition to tax and funding specialists.
An evaluation by The Hindu of information from the Reserve Bank of India, which carefully tracks outward investments by Indian corporations, reveals that almost 56% of such investments in 2023-24 have been in low tax jurisdictions (generally known as tax havens) akin to Singapore, Mauritius, the United Arab Emirates, the Netherlands, the United Kingdom, and Switzerland.
In different phrases, out of the entire ₹3,488.5 crore of outward international direct funding (FDI) by India in 2023-24, about ₹1,946 crore went to these low tax jurisdictions.
In truth, simply three of these countries — Singapore (22.6%), Mauritius (10.9%), and the UAE (9.1%) — accounted for greater than 40% of India’s outward FDI in 2023-24.
Further, this pattern appears to have elevated in depth within the present monetary yr. In the primary quarter, these low tax jurisdictions accounted for 63% of India’s whole outward FDI.
However, whereas countries all over the world, together with India, have sought to crack down on the pattern of corporations shifting income to these tax havens, specialists have mentioned that selecting these low tax jurisdictions can be a strategic crucial for Indian corporations, not only a tax challenge.
“If Indian companies are making investments outside India, then having them through a company set up in one of these jurisdictions makes a lot of sense,” in accordance to Riaz Thingna, Partner, Grant Thornton Bharat.
He mentioned that, if an Indian firm is trying to arrange a subsidiary in Europe, the U.S., or another nation, then doing it by way of a particular function automobile in Singapore or the same jurisdiction will assist them in getting strategic traders, and in offering higher tax positioning on the time of stake dilution.
“These jurisdictions are also more flexible in transferring funds and investments on a day-to-day basis,” Mr. Thingna defined. So, fairly often, these investments should not being made solely to evade, keep away from or scale back tax. They are sometimes made as a result of these jurisdictions kind platforms for funding in third countries.”
First degree
Vaibhav Luthra, Tax Partner at EY India, too, defined that the RBI information doesn’t present the final word funding vacation spot, however solely reveals the primary degree of outward investments.
According to Mr. Luthra, these low-tax or “tax efficient” jurisdictions not solely present a tax benefit, but additionally provide tax stability. Apart from this, additionally they include different benefits for Indian corporations trying to make investments overseas.
“A lot of the time, for things like fund raising, or for an investor coming in, they usually like coming in at these intermediate jurisdictions,” he defined. Also, having an entity within the center additionally protects the Indian mum or dad firm.”
Mr. Thingna additionally pointed to the propensity of international corporations to select a low-tax jurisdiction to kind a three way partnership fairly than in India.
“If the Indian company is looking for a strategic partner, a strategic partner from any other country will be happier investing into the Singapore entity, or one in a similar jurisdiction, than into the Indian entity because of our FDI regulations, our taxation and various other elements,” Mr. Thingna defined.
The RBI information additionally factors to this pattern. The information for July 2025, the newest out there information on outward funding, reveals that joint ventures accounted for nearly 60% of the investments made by Indian corporations within the low-tax jurisdictions.
Tariff final result
Mr. Thingna was additionally of the idea that the excessive tariffs imposed by the U.S. on imports from India might induce Indian corporations to make investments overseas, in the event that they proceed.
“There could be a lot of companies who will set up subsidiaries and other entities outside India, where the value addition is done, and accordingly escape the harsher tariffs on India,” he mentioned. “This has not happened yet, as the tariffs are recent, but it could happen.”
Published – September 14, 2025 06:58 am IST