With the new tax treaty with Singapore and Mauritius coming into effect from April 1, inflows through participatory notes (Pnotes) could see a sharp drop. According to Securities and Exchange Board of India (Sebi) data, nearly 90 per cent of P-note investments are routed through Singapore and Mauritius, with which the Indian government has reworked tax arrangements. According to the changed double taxation anti avoidance agreements (DTAAs), all investments made from these jurisdictions would attract shortterm capital gains as the exemptions would get removed. Mauritius and Singapore are favoured by entities issuing P-notes also called offshore derivative instruments (ODIs), thanks to tax-treaty benefits, particularly non-applicability of Indian laws. The new treaty says that capital gains that arise from shares purchased after April 1 by foreign investors based in these countries can be taxed in India.Accordingly, a capital gains tax of at least 7.5 per cent can be charged on short-t