Singapore-listed India ETF may help foreign investors on taxes

UTI Asset Management, one of India’s largest money managers, is launching a Singapore-listed exchange-traded fund that may offer a more tax-efficient route to gain exposure into the South Asian country’s stocks at a time when high levies are deterring foreign investors.

The UTI India Nifty 50 Index ETF VCC, scheduled to list in Singapore on 12 November, will invest in an onshore India-listed ETF rather than buying shares directly. According to its prospectus, the feeder structure allows it to claim an exemption under the India-Singapore tax treaty, avoiding capital gains taxes of 12.5% on long-term holdings and 20% on short-term investments.

The launch may provide an early test of whether tax-efficient structures can help India compete for global capital without a broader change to its tax regime. Higher investment taxes, relatively rich valuations and limited exposure to the AI boom have weighed on India’s appeal, leaving its stock benchmark on course for its first annual decline in 11 years. Any reduction in the tax drag may improve India’s competitiveness against other emerging markets as concerns over funding and borrowing costs test the global AI trade.

“The time is ripe to launch an ETF providing investors a solution to access India that is low-cost and transparent,” said Jermyn Wong, chief executive officer of UTI International Singapore. “Large cap valuations in India are currently looking attractive.”

The product will be Singapore’s first Nifty 50 ETF and the first MAS-authorized retail feeder fund investing directly into an India-domiciled fund, according to UTI. While GIFT City, India’s international financial services hub, already offers fund structures with tax advantages, those aren’t necessarily comparable to a publicly traded ETF.

To be sure, the prospectus flags a potential tax risk: while the fund expects to claim a treaty exemption on gains from the sale of Indian mutual-fund units, Indian authorities could challenge that position.

The ETF will trade on the SGX in US and Singapore dollars and will invest 95% to 100% of assets in the India-listed UTI Nifty 50 ETF and charge up to 0.43% a year as fees. The initial offer runs through Nov. 6 at $1 a share, with Phillip Securities Pte., Flow Traders Asia Pte. and North Point Global Pte. as market makers.