The Supreme Court has held that prominent venture capital investor Tiger Global’s $1.6-billion stake sale in e-commerce firm Flipkart to Walmart is subject to taxes.
This landmark decision, which was being closely followed by foreign investors, could have far-reaching implications for India’s startup ecosystem and shape the future of cross-border deals.
Tiger Global had been locked in a legal tussle with Indian tax authorities over the 2018 stake sale by its Mauritius-based entities to Walmart.
The investment firm had made the investment through its Mauritius-based entities, but the top court observed that the benefit of the India-Mauritius Double Taxation Avoidance Agreement (DTAA) cannot be given to Tiger Global.
A DTAA is a bilateral treaty to prevent the same income from being taxed in both nations — the country where the income is earned and the country where the company is based out of.
In doing so, the Supreme Court also overturned an August 2024 Delhi High Court judgement. In this ruling, the High Court had revoked a March 2020 decision by the Authority for Advance Rulings (AAR) that denied Tiger Global the benefits of the India-Mauritius DTAA on the grounds that the transaction was, prima facie, structured to avoid tax.
Mauritius has been a preferred jurisdiction for investments in India due to the non-taxability of capital gains from the sale of shares in Indian companies until 2016.
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The Supreme Court judgment comes at a time when Indian startup funding is dwindling, with investors focusing on unit economics and profitability roadmaps.
A timeline of the case leading up to the SC’s ruling
After acquiring the stake in Flipkart, the Tiger Global entities — Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings — made investments in numerous Indian companies.
Subsequently, they applied for a “nil” withholding tax certificate from Indian tax authorities. Their arguments included that their gains were exempt from India’s capital gains tax under the “grandfathering” clause of the DTAA since the shares were purchased before April 1, 2017.
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Grandfathering essentially means exempting an activity from a new law or regulation.
The tax authorities denied this request. Their reasoning was that the Tiger Global entities “were not independent in their decision-making and that control over the decision-making relating to the purchase and sale of shares did not lie with them”.
The Tiger Global entities subsequently petitioned the AAR, which, too, dismissed their claim in the 2020 order mentioned above.
The AAR observed: “The investment made by the assesses in the Singapore Co., with an Indian subsidiary, was with a prime objective of obtaining benefits under the DTAA between Mauritius and India, and between Mauritius and Singapore.”
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The AAR said the assessees were part of Tiger Global Management LLC, USA, and were held through its affiliates via a web of entities based in the Cayman Islands and Mauritius.
“Therefore… the head and brain of the companies and, consequently, their control and management were situated not in Mauritius but outside, particularly in the USA,” it said.
Upon appeal, the Delhi High Court struck down the AAR order, holding that the belief that the transaction was designed for tax avoidance was arbitrary and incapable of being sustained.
This decision was subsequently challenged before the Supreme Court, which reversed the High Court order.
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In the judgment, Justice R Mahadevan observed that the DTAA would cover cases where the sale relates to movable property of a permanent establishment directly owned by the Mauritian company in the other state. “Transactions such as the present one would not fall within its sweep”.
The Implications for Indian startups
Amit Maheshwari, Managing Partner at tax and consulting firm AKM Global, said the ruling could have “overriding effect on investments which were grandfathered through India-Mauritius treaty amendment and the same may be questioned on the economic reality”.
“This judgment has far-reaching consequences for private equity, venture capital, and offshore investment structures. It signals the end of mechanical treaty benefit claims based solely on TRCs (Tax Residency Certificates) and formal residency, and reinforces India’s alignment with global anti-abuse standards. Going forward, investors will need to demonstrate genuine economic substance, autonomous decision-making, and bonafide commercial rationale in treaty jurisdictions,” Maheshwari said.
A Tax Residency Certificate is an official document from a country’s tax authority. It proves that an individual or entity is a tax resident there for a specific period. This is crucial for claiming benefits under a DTAA — that is, avoiding being taxed twice on the same income.
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Maheshwari explained that in the Tiger Global judgment, the court has categorically held that the mere possession of a TRC does not, by itself, preclude scrutiny by Indian tax authorities where the entity is alleged to be a conduit for tax avoidance.
A TRC, the court clarified, is not conclusive evidence of entitlement to treaty benefits when the surrounding facts indicate a lack of commercial substance.
“Investors face elevated tax uncertainty and litigation risk. Exit planning, valuations, and indemnities may require radical reassessment. The ruling would have a broader implication for the tax landscape in India by enhancing uncertainty of tax outcomes. Risk management tools like tax insurance and indemnities will likely become scarcer and far more expensive,” said Himanshu Sinha, Partner–Tax Practice, Trilegal.
Amit Baid, Head to Tax, BTG Advaya, said: “This marks a major, 180-degree shift in how DTAA benefits have been claimed so far. The ruling has serious implications for private equity funds, hedge funds and FPIs using Mauritius and Singapore based structures, including for pre-2017 investments. While it does not automatically reopen closed cases, it significantly strengthens the tax department’s hand in reassessment proceedings where permitted by law”.
Startup funding dwindling
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The ruling comes at a time when startup funding is already slowing.
According to market intelligence firm Tracxn, India’s tech startups raised $10.5 billion in 2025, a 17% decline from $12.7 billion in 2024 and a 4% decline from $11 billion raised in 2023.
Funding trends varied across stages. Seed-stage witnessed a total funding of $1.1 billion in 2025, marking a 30% drop from $1.5 billion raised in 2024 and a 25% decline compared to $1.4 billion in 2023.
Early-stage funding, however, showed resilience, rising to $3.9 billion in 2025, a 7% increase from $3.7 billion in 2024 and an 11% rise over $3.5 billion raised in 2023, indicating sustained investor confidence in scalable, growth-ready startups. Late-stage raised funding of $5.5 billion, a 26% decline from $7.5 billion in 2024 and an 8% drop compared to $6 billion in 2023.
