India tightens Mauritius tax treaty rules to prevent misuse of tax benefits, effective August 10
Economic Times 2 hrs ago·14 Oct 2026, 4:58 am
India has revised its tax treaty with Mauritius to prevent tax evasion, a move that takes effect on August 10. The new rules introduce a stricter 'Principal Purpose Test' that allows tax authorities to scrutinize investment claims more closely. This change specifically targets foreign portfolio investors and private equity funds using Mauritius as a conduit to invest in India, aiming to ensure these entities pay a fair share of taxes.
This development is significant for the broader market as it alters the landscape for foreign capital inflows. Historically, the Mauritius route was popular for its tax efficiency, but the new guidelines may reduce its attractiveness. Investors should monitor how this impacts the flow of foreign funds and the overall sentiment toward international investments in India.
Excerpt from Economic Times
The Finance Ministry has unveiled an important amendment to the India-Mauritius Double Taxation Avoidance Agreement. Effective August 10, the new Principal Purpose Test seeks to curb potential abuses of tax treaty benefits. This allows tax authorities to examine claims more thoroughly, specifically targeting…Read the original at Economic Times
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