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India-Mauritius tax treaty - 10 things to know with detail

• The India-Mauritius tax treaty is a bilateral agreement between India and Mauritius that governs the taxation of income earned by residents of one country in the other country.
• The treaty was first signed in 1983 and has been amended several times since then to address issues such as tax evasion and avoidance.
• One of the key provisions of the treaty is the exemption of capital gains tax for residents of Mauritius on the sale of shares of Indian companies. This has made Mauritius a popular destination for foreign investors looking to invest in India.
• In 2016, India and Mauritius signed a protocol to amend the tax treaty with the aim of preventing tax evasion and misuse of the treaty for round-tripping of funds.
• Under the amended treaty, capital gains tax will be applicable on the sale of shares of Indian companies acquired on or after April 1, 2017. However, investments made before this date will still be eligible for the exemption.
• The amended treaty also includes provisions to prevent abuse of the treaty through a limitation of benefits clause, which requires companies to meet certain criteria to qualify for the tax benefits.
• The treaty also includes provisions for the exchange of information between the tax authorities of the two countries to prevent tax evasion and ensure compliance with the tax laws of both countries.
• The treaty has been criticized for facilitating round-tripping of funds, where Indian residents route their investments through Mauritius to take advantage of the tax benefits offered by the treaty.
• The amended treaty aims to address these concerns by putting in place safeguards to prevent abuse of the treaty and ensure that it is used for legitimate investments.
• Overall, the India-Mauritius tax treaty plays a significant role in promoting investment and economic cooperation between the two countries, while also ensuring that tax evasion and avoidance are effectively addressed.