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April 23, 2024

India and Mauritius signs Protocol amending double-tax treaty

Executive summary

On 7 March 2024, India and Mauritius signed a Protocol amending the double-taxation avoidance agreement signed between India and Mauritius (India-Mauritius tax treaty).

The Protocol proposes to replace the Preamble to specifically provide that the intention of the tax treaty is to avoid double taxation without creating opportunities of non-taxation or reduced taxation through tax evasion/tax avoidance (including on account of treaty shopping, etc.).

The Protocol also proposes to introduce a principal purpose test in line with the Multilateral Instrument (MLI) provisions published by the Organisation for Economic Co-operation and Development (OECD).

This Alert summarizes the Protocol and relevant considerations for taxpayers.

Detailed discussion


The OECD published the MLI to address the concern with base erosion. The MLI provides a framework for amending tax treaties between countries to incorporate certain minimum standards, including incorporating a principal purpose test in the treaties.

While India and Mauritius were signatories to the MLI and India designated the India-Mauritius tax treaty as a covered tax agreement to be amended by the MLI, this result could not be implemented because Mauritius did not include India-Mauritius tax treaty as a covered tax agreement.

Current developments

On 7 March 2024, India and Mauritius signed a Protocol amending the India-Mauritius tax treaty. The key amendments include:

  • The Preamble to the India-Mauritius tax treaty is replaced to state that the intention of the tax treaty is to avoid double taxation without creating opportunities of non-taxation or reduced taxation through tax evasion/tax avoidance.
  • A new Article has been included to satisfy the principal purpose test condition (in line with the MLI) for availing the beneficial provisions of India-Mauritius tax treaty.
  • The Protocol requires India and Mauritius to notify one another regarding completion of the procedures required by their respective laws to implement the provisions of the Protocol. Once the notification has been issued by both the countries, the Protocol will enter into force on the date of later of the two notifications.
  • The provisions of the Protocol shall have effect from the date of entry into force of the Protocol — without regard to the date on which taxes are levied or the taxable years to which the taxes relate.


Historically, Mauritius has been a major jurisdiction contributing to the flow of foreign investment into India. Therefore, the Protocol is a significant development for overseas entities that have India investments through a Mauritius entity.

The language in the Protocol regarding the date of entry into force creates some ambiguity, making it unclear whether the Protocol can apply retrospectively to income earned in the past years that are still open to audits or should be only applied prospectively.

The Indian tax authority, on 12 April 2024, clarified1 that the concerns raised by taxpayers will be addressed as and when the Protocol comes into force. While the clarifications are awaited, taxpayers that may be impacted by the Protocol should:

  • Evaluate benefits, if any, under the existing investment holding structures, which are proposed to be availed in future under the India-Mauritius tax treaty after the Protocol becomes effective (including satisfaction of principal purpose test)
  • Assess the impact, if any, on past transactions if Protocol is interpreted to be effective retrospectively
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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (India)

Ernst & Young LLP (United States), Indian Tax Desk

Ernst & Young Solutions LLP, Indian Tax Desk, Singapore

Ernst & Young LLP (United Kingdom), Indian Tax Desk, London

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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