India-Mauritius DTAA Protocol Notified: Key Tax Implications

 The Government of India has notified the amendment to the Protocol of the India-Mauritius Double Tax Avoidance Agreement (DTAA) on 13 October 2026. The Protocol, originally signed in Mauritius on 7 March 2024, came into force on 10 August 2026 and introduces significant anti-abuse measures aligned with global tax standards.

Key Highlights

Amended Preamble The Protocol revises the DTAA preamble to clarify that the treaty is not intended to create opportunities for non-taxation or reduced taxation through tax evasion, tax avoidance, or treaty-shopping arrangements that indirectly benefit residents of third jurisdictions.

Introduction of Principal Purpose Test (PPT) A new Article 27B (Entitlement to Benefits) has been inserted into the DTAA. Under this provision, treaty benefits may be denied if one of the principal purposes of an arrangement or transaction is to obtain benefits under the treaty, unless it can be demonstrated that granting such benefits is consistent with the object and purpose of the DTAA.

The PPT under the DTAA is generally viewed as more stringent than the anti-avoidance provisions under the Income-tax Act, 2025, as it applies where one of the principal purposes is tax benefit, compared to the GAAR threshold of main purpose under Section 179(1) of the Act.

Retrospective Reach of the Protocol The Protocol specifically provides that its provisions will apply from the date of entry into force, i.e., 10 August 2026, irrespective of the tax year or the date on which the underlying taxes were levied. This may necessitate a review of existing and historical structures and transactions involving Mauritius.

Way Forward

While the new provisions strengthen treaty anti-abuse measures, taxpayers may continue to derive protection from the grandfathering provisions under GAAR and relevant CBDT notifications issued on 31 March 2026 and earlier guidance issued in January 2025 on PPT. These safeguards are expected to remain relevant for arrangements and investments entered into on or before 1 April 2017.

Given the interaction between the amended Protocol, GAAR grandfathering provisions, and judicial precedents such as the Tiger Global ruling, taxpayers with Mauritius-based structures should undertake a detailed review of their arrangements to assess potential implications and continued treaty eligibility.