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.
India and Mauritius have agreed to a protocol to alter a double taxation avoidance agreement (DTAA) stating that tax relief cannot be for the indirect benefit of residents of another country. As a result, all FPIs will have to examine whether they have enough commercial rationale to be based in Mauritius when the tax scrutiny happens.
Read the detailed analysis of Sarva Capital LLC Vs ACIT (ITAT Delhi) regarding the validity of Tax Residency Certificate (TRC) for determining treaty benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).
ITAT Delhi held that as shares were acquired prior to 01.04.2017, gain derived from sale of such equity shares is exempt under Article 13(4) of India-Mauritius DTAA.