By Naraway
In this article
In FY 2025-26, Singapore sent US$19.8 billion of foreign direct investment equity into India, about a third of the total and more than any other country. The United States, home to many of the companies behind that money, ranked well below it.
Sources: DPIIT via India Briefing; MCA via IBEF; treaty protocol via CMS.
What the Treaty Used to Do
Until March 2017, gains from selling shares in an Indian company were taxable only in Singapore under the India-Singapore tax treaty. Singapore did not tax most such gains. A fund holding Indian shares through Singapore could exit without capital gains tax in either country.
What Changed
| Shares acquired / sold | Capital gains treatment |
|---|---|
| Acquired before 1 April 2017 | Grandfathered: taxable only in Singapore, subject to the limitation-of-benefits test |
| Sold 1 April 2017 to 31 March 2019 | Taxed in India at half the domestic rate (transition) |
| Sold from 1 April 2019 | Taxed in India at the full domestic rate |
Sources: CMS; AZB & Partners; King Stubb & Kasiva.
The limitation-of-benefits clause, Article 24A, denies treaty benefits to shell or conduit companies. A Singapore entity has to show real business there to rely on the treaty at all.
Why Singapore Still Leads
The capital gains advantage for new investments ended nine years ago, yet Singapore's share has not fallen away. FDI statistics record the country the money last came from, and Singapore is where many Asia-Pacific headquarters, private equity funds and venture funds investing in India are based. Singapore also led new foreign company registrations in India in FY26, with 13.
What the Figures Show
The Singapore number is less a tax story now than a map of where India-focused capital is managed. The country of a holding company still changes treaty rates on dividends and interest, reporting under India's foreign investment rules, and the documentation tax authorities expect.
Part of Naraway's research series India Market Entry in 2026.
In short
Singapore was the largest source of foreign direct investment equity into India in FY 2025-26, at US$19.8 billion of US$58.85 billion. Until 2017, the India-Singapore tax treaty taxed gains on Indian shares only in Singapore. A 2016 protocol moved to source-based taxation from 1 April 2017: shares bought before then were grandfathered, gains in a two-year transition to March 2019 were taxed at half the Indian rate, and gains after that are taxed at India's full rate, subject to a limitation-of-benefits test against shell companies.
- Singapore: US$19.8 billion of India's FY26 FDI equity, the largest source.
- Before April 2017: gains on Indian shares taxed only in Singapore.
- From April 2017: taxed in India; earlier investments grandfathered.
- April 2017 to March 2019: half the Indian rate; after that, full rate.
- Treaty benefits require passing a limitation-of-benefits test.
Sources
- India FDI Report FY 2025-26, India Briefing
- India and Singapore amend tax treaty, CMS
- Protocol to India-Singapore Double Taxation Avoidance Agreement, AZB & Partners
- India-Singapore DTAA: capital gains grandfathering, King Stubb & Kasiva
Frequently Asked Questions
Which country invests the most in India?
Singapore, with US$19.8 billion of FDI equity in FY 2025-26, according to DPIIT data.
How did the India-Singapore tax treaty change in 2016?
A protocol moved capital gains on Indian shares to source-based taxation from 1 April 2017, with grandfathering for earlier investments and a half-rate transition until 31 March 2019.
Are gains on Indian shares held through Singapore still tax-free?
Not for shares acquired from 1 April 2017. Gains after the transition period are taxed in India at domestic rates.
What is the limitation of benefits clause?
A test in Article 24A of the treaty that denies benefits to shell or conduit companies set up mainly to obtain treaty benefits.
Why does Singapore still lead FDI into India?
The capital gains advantage ended for new investments, but Singapore remains the base for many regional headquarters and investment funds that invest in India, so their capital is recorded as coming from Singapore.
