₹3488.5 Cr Outflow: Why 63% Of India’s FDI Now Lands In Tax Havens, 6 Points

Delhi

RBI Data: ₹1,946 Cr of India’s Outward FDI Routed via Tax Havens in FY24
Singapore, Mauritius & UAE Absorb 42.6% of India’s Global Investments

1. India’s Outward FDI Snapshot (2023-24)

• Total Outward FDI: ₹3,488.5 crore.

• To Low-Tax Jurisdictions: ₹1,946 crore (≈56% of total).

• Key Destinations:

  • Singapore: 22.6% share (~₹788 crore).

  • Mauritius: 10.9% share (~₹380 crore).

  • UAE: 9.1% share (~₹317 crore).

  • Together, these 3 account for >40% of India’s outward FDI.

2. Rising Share in FY25

• In Q1 of FY25, 63% of India’s outward FDI flowed into tax havens.

• Indicates increasing reliance on tax-efficient jurisdictions.

3. Strategic Role of Tax Havens

• Not just tax avoidance – multiple business advantages:

  • Easier fund transfers & investment flows.

  • Better tax positioning during stake dilution.

  • Strong appeal for global investors.

• Example: Setting up a special purpose vehicle (SPV) in Singapore improves chances of attracting European/US investors.

4. Why Indian Companies Prefer These Jurisdictions

• Tax Stability: Predictable and investor-friendly frameworks.

• Fundraising Advantage: Foreign investors often prefer Singapore/Mauritius entities over Indian ones due to simpler FDI rules & taxation.

• Risk Shielding: Intermediate entities provide legal and financial protection to Indian parent companies.

• Joint Ventures:

  • July 2025 RBI data – 60% of outward FDI via tax havens was for JVs.

  • Foreign partners show higher comfort investing in neutral jurisdictions.

5. Global Trade Pressures Driving Shift

• U.S. Tariffs on Indian Exports:

  • Companies may relocate production or set up subsidiaries abroad.

  • Helps bypass tariff barriers and retain competitiveness.

• Future Outlook: More Indian firms could use overseas entities to mitigate tariff impact.

6. Financial Takeaways

• Over half (56-63%) of India’s outward FDI is routed through tax havens.

• Top 3 destinations alone attract over ₹1,485 crore annually.

• Joint ventures (60%) remain the leading investment structure.

• Tax havens act as strategic gateways, not just tax shelters.

Disclaimer (The Profit India)

This article is for informational purposes only. The data and analysis are based on publicly available RBI statistics and expert commentary. It should not be construed as investment, legal, or tax advice.