India-Mauritius tax treaty

India-Mauritius Tax Treaty Drama Unfolds: Updates on Protocol Amendments

Find out the latest on the amended India-Mauritius tax treaty protocol and its implications for tax concerns. Stay informed with our engaging summary! #TaxTreaty #IndiaMauritius

The India-Mauritius tax treaty has been a topic of discussion recently, with the Income Tax Department addressing concerns regarding premature tax implications. An amendment to the Double Taxation Avoidance Agreement (DTAA) with Mauritius has been signed to prevent treaty abuse for tax evasion or avoidance. However, the protocol facilitating these amendments is yet to be ratified and notified, as confirmed by the Finance Ministry. The revised treaty aims to combat tax evasion by ensuring that tax is imposed post-agreement signing, without any retrospective taxation.

The amended India-Mauritius protocol on double taxation avoidance agreement is still pending ratification and notification, creating uncertainty around the tax treaty tweaks. This delay has led to concerns among foreign investors, especially Foreign Portfolio Investors (FPIs), who have pulled out nearly $1 billion from Indian equities. The market volatility, coupled with weak global cues and US retail inflation affecting rate cut expectations, has intensified the impact of the tax treaty adjustments.

In 2016, India and Mauritius signed a revised tax agreement heralding the taxation of capital gains in India on shares transactions conducted through the countries. This significant change marked a shift in tax policies affecting foreign investments. The agreement's alteration to disallow indirect tax relief has caused FPIs to reassess their investment strategies, indicating a potential shift in investor sentiment towards the treaty revisions.

As the drama around the India-Mauritius tax treaty unfolds, it underscores the importance of regulatory clarity for foreign investments. The evolving landscape of tax treaties and their impact on global markets highlights the need for proactive measures to address tax evasion and avoidance. Stay tuned for more updates on the implications of the amended tax treaty for investors and the financial markets.