Within two days after a ruling that had put a question mark on several investment structures, the Mauritius Revenue Authority (MRA) on Friday clarified its earlier stand to assure global investors who were worried over the tax impact on investments by tax haven entities in private equity (PE) funds in India.

MRA clarified that any income which is distributed by a foreign "fiscally transparent entity" will retain its initial character in Mauritius. Thus, capital gains booked by a PE Fund in India, where a Mauritius vehicle has invested, will remain capital gains when funds are distributed by the PE to the Mauritius entity.

A few days ago, MRA, which is the apex tax body in Mauritius, had in a private ruling said that such distributions would be be treated as 'income' (and not capital gains) --- and therefore taxable in Mauritius. The ruling which was posted in the MRA website had unsettled many international investors who put money in Indian PEs through a feeder vehicle in the tax haven.