India confiscated $725 million from Xiaomi's local bank accounts Saturday, police said. An inquiry discovered that the Chinese smartphone company illegally moved money abroad under royalty payments.

India's financial crime investigations agency launched an investigation into the company in February. It said it confiscated funds from the firm's local subsidiary after discovering it had made remittances to three foreign-based companies.

"These colossal sums in the name of royalties were remitted at the direction of their Chinese parent group entities," the Enforcement Directorate said.

Xiaomi did not react quickly to AFP's request for comment.

In December, the firm's India branch was raided as a separate inquiry into possible tax cheating.

At the time, several Chinese smartphone manufacturers, including Huawei, had their Indian offices examined.

Since a deadly Himalayan border battle between soldiers from both nations in 2020, relations between New Delhi and Beijing have been at a low ebb.

India's home ministry banned hundreds of Chinese-language smartphone applications following the incident, including the famous social media network Tiktok.

The administration justified the app prohibitions to defend India's sovereignty.

Since the tragic 2020 military encounter, anti-China sentiment has increased in India, prompting demands for consumer boycotts of Chinese goods.

According to media estimates, China is a critical economic partner for India, with bilateral trade exceeding $125 billion last year.