People in Mauritius get offended when it is called a "tax haven", India's High Commissioner T P Seetharam said.

"The stock market's reaction to Finance Minister P Chidambaram's budget speech and the reaction of the investors has nothing to do with Mauritius. Instead, the locals feel offended if Mauritius has been termed as a tax haven," he told reporters in an informal interaction here.

On the day of the Union Budget on February 28, Indian stocks had fallen sharply after Chidambaram said that Tax Residency Certificate (TRC) is "a necessary but not sufficient" condition to avail of the benefits under double taxation avoidance agreements.

Mauritius is one of the major countries that issues TRC for foreign investors looking to invest in India with tax benefits arising from Indo-Mauritian tax treaty.

Later, Finance Ministry clarified that no fresh changes has been proposed in the budget with regard to Mauritius and those investing through the island nation.

The High Commissioner said the taxes are actually low in the country making it one of the favourite destinations for people who want to set up business here.

Seetharam, however, refused to comment on the role of alleged Mauritius based fictitious companies instrumental in alleged channelising of illegal funds and re-routing of suspect money in India.

Mauritius has often been accused of being used as a conduit for routing of untaxed funds to and from India. A revised treaty between the two countries is in works to address these concerns.

The High Commissioner spoke at length about the role of Indians in the development of Mauritius.

"Looking at the economic, cultural and strategic importance that Mauritius has for India in the Indian Ocean it is in the interest of India to maintain cordial relations with Mauritius," Seetharam said.

In an informal chat with the press delegation that accompanied the President of India Pranab Mukherjee here on Monday, Seetharam said there is presence of a large Indian diaspora here which has been well represented by politicians of Indian origin in the government.

"The island country will always remain a close ally to India," he said.

He further added that fear of China entering different sectors in Mauritius is unfounded as China's presence could be felt everywhere in the world, even in India in the power sector.

"The SEZ founded by China in Mauritius was a non-starter whereas India has deep rooted business interests in the country. We have been running fine educational institutions, hospitals and other social institutions that have helped the local economy to grow and prosper," he said.