This limitation on third-party countries will be a concern, along with the new requirement to demonstrate that tax relief is not one of the principal purposes of the investment, said experts.
Foreign investors entering India via Mauritius are set to face greater scrutiny of their investments, with the two countries inking a protocol to amend their double-taxation avoidance agreement.
The latest 2024 amendment which incorporates the Principal Purpose Test in the DTAA can potentially undo the ‘grand-fathering’ by throwing open even investments made before 2017 to fresh scrutiny. The amendment states that the new protocol “shall have effect without regard to the date on which taxes were levied or the taxable years to which the taxes relate.”
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