Supreme Court tax ruling sparks concerns among foreign investors in India

On January 15, the Supreme Court ruled that American investment firm Tiger Global must pay taxes in India on profits from the 2018 sale of its shares in Flipkart. This overturned a previous Delhi High Court ruling from 2024, which had allowed tax exemption under the India-Mauritius tax treaty.

The Supreme Court adopted a stricter interpretation of tax treaties. It stated that simply having a tax residency certificate is not sufficient to qualify for treaty benefits. Offshore investment structures deemed to lack actual business operations could be denied tax exemptions. Experts fear that this may increase the risk of tax liability for future share sales and discourage foreign investment.

Legal and tax specialists noted that the ruling allows authorities to scrutinize many past transactions previously considered settled. Anonymous lawyers mentioned that clients are worried that transactions they believed resolved might now face re-investigation.

The Tiger Global case began in 2018 when Walmart acquired Flipkart. Tiger Global sold its roughly 17% stake for approximately $1.6 billion through three Mauritius-based entities. The firm argued that its investment was made before 2017 and thus eligible for tax exemption. However, Indian tax authorities contended that these Mauritius entities were used to avoid taxes without real business activity.

The Supreme Court ultimately ruled in favor of the tax authorities, emphasizing the sovereign right of the state to tax income generated within the country. The ruling’s implications extend beyond Tiger Global, putting many old investments via Mauritius and other countries at risk. While India and Mauritius amended the tax treaty in 2024, it applies only to future agreements.

India has historically attracted foreign capital through tax exemptions and other incentives. Government data shows that nearly $180 billion has come from Mauritius alone between 2000 and March 2025. Long-standing debates about tax avoidance and misuse of offshore structures persist. Analysts warn that this recent ruling may weaken investor confidence and negatively impact new investment flows, particularly amid global trade tensions and geopolitical risks.