To get cosy with Cyprus, a popular tax haven, India will soon consider removing the island-nation as a non-cooperative jurisdiction for income tax purposes. An official release issued by the Finance Ministry said an in-principle agreement was reached with the country on all "pending" issues, including capital gains. The proposal, which follows the finalisation of a double taxation avoidance agreement (DTAA) between the two countries, should come as music to the ears of Indian taxpayers transacting with those in Cyprus. At present, Cypriots face higher withholding taxes and the consequences of transfer-pricing provisions, among other inconveniences. Cyprus was the only country to have been blacklisted by India as a non-cooperative jurisdiction, due to lack of effective exchange of information. In line with the recent amendments to the India-Mauritius tax treaty, both sides have agreed to shift to source-based taxation on capital gains on the sale of shares. There will also be grandfathering of investments made before April 1, 2017, and capital gains will be taxed in the country of the taxpayer's residence. India and Cyprus had entered into a tax treaty in 1994, and are obliged to exchange information. On November 1, 2013, the Finance Ministry notified Cyprus as a non-cooperative jurisdiction following failed discussions to secure the desired level of cooperation.