New Delhi: The Finance Ministry has amended the India-Mauritius tax treaty to curb treaty abuse by introducing a Principal Purpose Test (PPT), a move that will allow tax authorities to deny treaty benefits where obtaining them was one of the principal purposes of a transaction or arrangement.
What changes
Under the amendment, investments made before April 1, 2017 remain outside the scope of the test. The move puts greater focus on the commercial purpose and substance of investment structures routed through Mauritius, a long-standing conduit for foreign investment into India. The PPT aligns the treaty with the OECD/G20 BEPS framework's minimum standards on treaty shopping.
The amendment is significant because the India-Mauritius treaty has historically been one of the most-used routes for foreign portfolio and direct investment into India, with capital gains exemptions that were tightened in stages since 2016. The introduction of the PPT adds a substance-based backstop against arrangements set up primarily to access treaty benefits.
A broader anti-abuse push
The change forms part of the government's broader effort to close treaty-shopping gaps across its bilateral tax agreements, consistent with India's commitments under the multilateral instrument framework. Businesses and funds routing investments through Mauritius will now need to demonstrate genuine commercial substance beyond merely accessing treaty advantages.
Sources:
- Top Business & Market Headlines Today — BL Morning Report, October 15, 2026 — The Hindu BusinessLine
What changes
Under the amendment, investments made before April 1, 2017 remain outside the scope of the test. The move puts greater focus on the commercial purpose and substance of investment structures routed through Mauritius, a long-standing conduit for foreign investment into India. The PPT aligns the treaty with the OECD/G20 BEPS framework's minimum standards on treaty shopping.
The amendment is significant because the India-Mauritius treaty has historically been one of the most-used routes for foreign portfolio and direct investment into India, with capital gains exemptions that were tightened in stages since 2016. The introduction of the PPT adds a substance-based backstop against arrangements set up primarily to access treaty benefits.
A broader anti-abuse push
The change forms part of the government's broader effort to close treaty-shopping gaps across its bilateral tax agreements, consistent with India's commitments under the multilateral instrument framework. Businesses and funds routing investments through Mauritius will now need to demonstrate genuine commercial substance beyond merely accessing treaty advantages.
Sources:
- Top Business & Market Headlines Today — BL Morning Report, October 15, 2026 — The Hindu BusinessLine
