• UGI USER
  • Apr 12, 2024
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INDIA, MAURITIUS UPDATE TAX TREATY TO TACKLE EVASION CONCERNS.

Why in the news?

India-Mauritius tax treaty amended to prevent tax evasion, impacting investments; concerns raised over treatment of past investments.

source:reseauvoltaire

Understanding India-Mauritius Tax Treaty Amendment:

  • India has signed a protocol amending the Double Taxation Avoidance Agreement (DTAA) with Mauritius to prevent tax evasion or avoidance.
  • The amended pact includes the Principal Purpose Test (PPT), ensuring that tax benefits under the treaty won’t apply if obtaining them was the primary purpose of a transaction.
  • Article 27B in the treaty defines entitlement to benefits, denying treaty benefits where obtaining them was a principal purpose of the transaction.
About  Double Taxation Avoidance Agreement (DTAA) :

  • Tax treaty between countries to prevent double taxation.
  • Ensures taxpayers aren’t taxed twice on the same income.

Importance of DTAA:

  • Attracts investment by providing relief from dual taxation.
  • Makes a country more appealing to investors.

Recent Amendment:

  • India revised its DTAA with Mauritius to address loopholes.
  • Ensures capital gains tax payment by Mauritian entities selling shares in Indian companies from April 2017.

Source:

https://m.economictimes.com/news/india/india-mauritius-sign-protocol-to-amend-tax-treaty-principal-purpose-test-introduced/articleshow/109224235.cms#:~:text=claim%20treaty%20benefits.-,Tax%20experts%20said%20a%20new%20article%20has%20been%20added%20to,with%20a%20bona%20fide%20purpose.