The Indian cabinet gave its approval to a double taxation avoidance treaty with Luxembourg in Europe, giving a new boost to the economic and bilateral ties. The cabinet chaired by Prime Minister Manmohan Singh approved the agreement which covers both avoidance of double taxation and prevention of fiscal evasion in respect of the taxes on income and capital.

After the meeting, the central government’s principal information officer Deepak Sandhu told the media persons that the agreement would encourage capital flow between the two countries.

“The agreement will stimulate the flow of capital, technology and personnel from India to Luxembourg and vice-versa. It will provide tax stability and reduce any obstacles in providing mutual co-operation,” Sandhu said.

According to Sandhu, India has so far signed such bilateral treaties with 71 countries. “In more than 20 double taxation avoidance agreements (DTAAs), the scope of agreement includes capital taxes,” Sandhu said.