Q. The term “round tripping” in case of Foreign Direct Investments is related to which among the following?
Answer: Coming Back of Domestic Money as FDI
Notes: Round tripping refers to money from one country going out through unofficial channels and being invested back into the same country from outside to avail of tax benefits under the double tax avoidance agreement (DTAA). Round Tripping makes the government lose large amount of revenue because the domestic firms, route the investment through Mauritius. So, now finally CBDT (Central Board of Direct Taxes) proposes that the Domestic companies routing their investments through Mauritius would soon have to pay capital gains tax. For this, a review of the capitals gains tax provisions is required and CBDT is pressing for it.