A revised tax treaty between India and Mauritius will come into effect only once the two countries sign the agreement and will not be applied retrospectively, news channel CNBC-TV18 reported on Friday, citing sources.
The new provisions in the treaty include a principle purpose test, which will be used to judge whether tax benefits under the treaty will apply to investments or not, according to the text of the treaty released by India’s foreign ministry.
As per the amended treaty, tax benefits for investments will not be granted if it is ascertained that availing tax benefits was one of the reasons of the transaction.
The Finance Ministry did not immediately respond to queries.
Investment into India by Foreign Portfolio Investors (FPIs) from Mauritius stood at 4.19 trillion rupees ($50.20 billion), about 6% of total the FPI investments as of March 2024, according to data from the National Securities Deposit
India and Mauritius entered into the so-called Double Taxation Avoidance Agreement in 1982 so non-residents investors can avoid paying double taxes. The amended treaty aims to curb tax evasion and avoidance.