An analysis of Reserve Bank of India data for 2023–24 reveals a striking trend — nearly 56% of India’s outward FDI now flows into low-tax jurisdictions such as Singapore, Mauritius, the UAE, the Netherlands, the UK, and Switzerland. This signals not merely a tax-driven movement, but a deeper shift in how Indian companies strategically use global financial hubs to expand internationally, attract investors, and manage cross-border operations efficiently.
India’s Outward FDI: A Strategic Turn Toward Low-Tax Jurisdictions
In 2023–24, India invested ₹3,488.5 crore abroad. Of this, ₹1,946 crore — more than half — went to low-tax jurisdictions traditionally labelled “tax havens.” What is driving this shift?
- Singapore (22.6%), Mauritius (10.9%), and UAE (9.1%) together accounted for over 40% of India’s outward FDI.
- In the first quarter of 2024–25, these jurisdictions absorbed 63% of India’s outbound investments, showing that the trend is strengthening.
- These jurisdictions are not merely tax shelters — they offer stability, easier fund movement, global investor comfort, and flexible corporate structures.
Contrary to popular belief, experts note that this trend is not primarily about tax avoidance. Instead, these hubs act as efficient platforms for Indian companies eyeing global expansion.
A More Complex FDI Story: Beyond Tax Advantages
While global tax authorities are tightening scrutiny on profit shifting, Indian firms increasingly use these jurisdictions as springboards for global operations — especially when entering Europe, the U.S., and other developed markets.
- Special Purpose Vehicles (SPVs) in Singapore or UAE help Indian firms raise capital and onboard strategic investors more easily.
- Tax-efficient structures offer stability and predictability, vital for long-term global operations.
- Such jurisdictions provide smoother cross-border fund transfers and operational flexibility compared to India’s regulatory landscape.
- Foreign companies prefer forming joint ventures in neutral jurisdictions like Singapore rather than directly in India.
The RBI’s July 2025 data reinforces this: Nearly 60% of Indian investments in low-tax jurisdictions were routed through joint ventures.
Low-tax jurisdictions today are strategic hubs — not shortcuts — enabling Indian firms to globalize with agility, attract international partners, and structure investments smartly.
Tariffs, Trade Pressures & Emerging Global Dynamics
Experts also warn that rising U.S. tariffs on Indian exports could accelerate offshore investment. By setting up subsidiaries abroad, Indian companies could perform value-added steps outside India and potentially escape harsher tariff regimes.
While this transition has not fully materialized yet, the strategic incentives are clear: In a world of shifting supply chains, geopolitical tensions, and protectionist policies, Indian companies are looking to position themselves optimally in global markets.
How T&A Consulting Helps Indian Companies Navigate Outward FDI Strategically
As Indian businesses expand their global footprint, the use of tax-efficient jurisdictions is no longer a niche strategy — it is a mainstream pathway for internationalization. T&A Consulting supports companies in understanding, structuring, and executing these outbound investment strategies while ensuring regulatory compliance and long-term value creation.
- FDI Structuring & Jurisdiction Selection: T&A advises clients on choosing the right jurisdiction — Singapore, UAE, Netherlands, UK, Mauritius — based on tax stability, investor comfort, treaty benefits, and operational goals.
- Cross-Border Tax & Regulatory Guidance: Companies receive clarity on FEMA, RBI reporting, BEPS norms, and global tax considerations, ensuring that outward FDI is both compliant and efficient.
- Incorporation & SPV Setup Support: From establishing holding companies to forming SPVs and subsidiaries, T&A manages the end-to-end process across multiple jurisdictions.
- Facilitating Joint Ventures & Strategic Partnerships: With many foreign investors preferring neutral jurisdictions like Singapore, T&A helps structure JV agreements, negotiation frameworks, and operational models.
- Fundraising & Investor Alignment: T&A aligns global investors with Indian companies through optimized holding structures, improving readiness for stake dilution and international capital flows.
- Global Expansion Planning: Advisory includes market entry, risk assessments, supply chain structuring, and tariff impact planning — vital in an evolving global trade environment.
As outward FDI becomes more strategic than ever, T&A Consulting provides the clarity, structure, and execution support that Indian companies need to compete globally with confidence.
Whether you are planning to set up an international subsidiary, form a global JV, or evaluate tax-efficient jurisdictions for expansion, T&A Consulting can guide you at every step.
Contact us at: pnijhawan@taglobalgroup.com to explore how we can support your global investment strategy.
Source:
The Hindu — Nearly 60% of India’s outward FDI goes to tax havens (2025)