India has signed a protocol to amend the Double Taxation Avoidance Agreement (DTAA) with Mauritius.
The amended pact has introduced the Principal Purpose Test (PPT). It aims to curtail tax avoidance by ensuring that treaty benefits are only granted for transactions with a bona fide purpose.
This amendment will apply to all incomes like capital gains, dividends, and fees for technical services.
Principal purpose test (PPT) will decide whether a foreign investor is eligible to claim treaty benefits.
Article 27B has been introduced in the treaty defining the ‘entitlement to benefits’.
Amendment to the India-Mauritius treaty was signed on March 7 at Port Louis.
FPI investment from Mauritius had stood at Rs 3.25 lakh crore. It was FPI investment at Rs 4.19 lakh crore at the end of March 2024.
In 2016, India and Mauritius signed a revised tax agreement. It gave India the right to tax capital gains in India on transactions in shares routed through Mauritius.
