Amended India-Mauritius tax treaty protocol yet to be ratified, notified: IT dept

Tax treaty: amendment to India-Mauritius double taxation avoidance agreement has been met with both anticipation and concern. Income Tax Department on Friday said amended India-Mauritius protocol on double taxation avoidance agreement is yet to be ratified and notified by department.

revised protocol, signed on March 7, 2024, introduces a principal purpose test (PPT) aimed at thwarting tax avoidance practices by ensuring that treaty benefits are granted only for transactions with genuine commercial intent.

However, despite amendment, uncertainties loom as protocol awaits ratification and notification by Income Tax Department under section 90 of Income-tax Act, 1961. Until official ratification occurs, queries surrounding implications of amendment remain premature, as highlighted by a recent statement from tax authorities.

introduction of PPT test marks a significant shift, potentially subjecting investments routed through Mauritius to heightened scrutiny by Indian tax authorities. This move could prompt a reevaluation of existing investment structures to ensure compliance once protocol comes into force.

impact of se regulatory changes is alrey reverberating in financial markets, with India's benchmark indices, Sensex and Nifty, witnessing a 1% dip attributed to widespre profit-taking by investors. This downturn underscores sensitivity of market sentiment to regulatory developments and underscores need for clarity and guidance as amended protocol progresses towards implementation.

With PTI Inputs