Why would you send money abroad just to bring it back?

Because of what the money becomes when it returns. Many countries give foreign investors better treaty treatment, lower taxes on gains, and sometimes lighter regulation than they give their own residents. By routing domestic money through a treaty country like Mauritius, a domestic investor can return home wearing a foreign investor's clothes and claim those advantages, chiefly the capital gains exemption.

Did India lose tax for thirty years because of one treaty clause?

Largely, yes, on gains routed through Mauritius. Article 13(4) handed the sole taxing right on Indian share gains to Mauritius, and Mauritius taxed them at zero. The combination meant the gains escaped tax entirely. It took the 2016 Protocol to restore India's right to tax those gains, and the 2026 Supreme Court ruling to close off the use of conduit companies that tried to keep claiming the old benefit.

Round-Tripping, Explained

ByLoopholeKiln EditorialPublished17 June 2026

Figures current as of1 January 2026·Corrections

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Round-tripping turns the haven story on its head. Instead of moving profit out to escape tax, you move your own capital out and then bring it straight back home, disguised as foreign investment, so you can claim the tax breaks and treaty protections that countries reserve for genuine foreign investors. The classic route ran from India, out to Mauritius, and back into India. India shut the main door with a 2016 treaty change, and its Supreme Court tightened it again in 2026.

What it is

A structure in which domestic capital is sent offshore and then reinvested back into the home country dressed up as foreign direct investment. The point is to let a domestic investor claim the incentives, treaty benefits and regulatory advantages that are meant for real foreign investors. The textbook case is the India-Mauritius route, which rested on the tax treaty between the two countries.

How it works, step by step (the India-Mauritius version)

Indian capital, whether company profit, personal wealth, or undeclared money, is sent to a company set up in Mauritius under a Global Business Licence.
The Mauritius company is lightly staffed, with a nominee board that meets occasionally, and it holds a Tax Residence Certificate establishing that it is resident in Mauritius for treaty purposes.
The Mauritius company invests that money back into India, where it is recorded as "foreign direct investment." Through the India-Mauritius treaty, it gains the treaty's benefits, including, critically, an exemption from Indian capital gains tax.
When the Indian investment is later sold, the gain arises. Under the treaty as it stood, that capital gain was taxable only in Mauritius. And Mauritius charged no capital gains tax. So the gain was taxed nowhere.
The proceeds flow back to Mauritius and then to the original Indian owner, tax-free. Meanwhile Indian statistics record the whole thing as foreign investment arriving from Mauritius, which distorts the figures.

The treaty provision at the heart of it, Article 13(4) of the 1982 India-Mauritius agreement, gave Mauritius the sole right to tax gains on shares in Indian companies. Because Mauritius taxed such gains at zero, the exemption was total. For more than thirty years, from 1982 to 2017, this let investors avoid Indian capital gains tax through Mauritius.

Who used it

This was a structural route used very widely rather than a single company's scheme; a large share of recorded foreign investment into India historically came through Mauritius for exactly this reason. The International Monetary Fund has documented that round-tripping distorts countries' balance-of-payments statistics, recording capital that leaves and the same capital returning as if they were unrelated, and estimated that a meaningful proportion of recorded foreign investment into India, China and Russia historically had round-tripping characteristics.

Is it still open, and when did it close

Constrained, jurisdiction by jurisdiction. India renegotiated the Mauritius treaty in a Protocol signed on 10 May 2016, with three key effects:

India regained the right to tax capital gains on shares of Indian companies acquired on or after 1 April 2017.
A transition period, from 1 April 2017 to 31 March 2019, capped the rate at half of India's domestic rate, subject to a limitation-of-benefits condition.
From 1 April 2019, the full domestic Indian rate applies. Shares acquired before 1 April 2017 keep grandfathered protection.

India's Supreme Court tightened the position further in a 15 January 2026 ruling, on an indirect share transfer brought by a US investment group, holding that a Tax Residence Certificate is not conclusive and denying Mauritian entities treaty benefits where the real control sat elsewhere and the structure was a conduit.

Other countries addressed their own versions: China acted on indirect transfers through a 2009 circular and later beneficial-ownership guidance, and Russia moved against round-tripping through Cyprus by renegotiating that treaty in 2020.

Sources