Should investors worry about India-Mauritius tax treaty amendments? Punit Shah answers
«There used to be the provisions like general anti avoidance rules like GAAR, which required the investors like FPIs who are based in Mauritius need to have substance in Mauritius in order to claim the benefit of India-Mauritius tax treaty,» says Punit Shah, Partner, Dhruva Advisors.
Let us talk about this treaty and this change that we are making. What is the impact that one should actually expect from this? Is it too much of a worry for investors from Mauritius?
Essentially what it says is that India-Mauritius tax treaty was there for several years now. It provides capital gains tax exemption on the equity shares, on derivatives, on debt instruments. The treaty was amended in 2017 where the capital gains exemption on equity shares was taken away and the capital gains exemption on the derivatives and debt instruments did continue.
There used to be the provisions like general anti avoidance rules like GAAR, which required the investors like FPIs who are based in Mauritius need to have substance in Mauritius in order to claim the benefit of India-Mauritius tax treaty.
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There is another provision like principal purpose test or MLI which further requires that the FPIs or any other investors which are based in Mauritius need to have a commercial rationale or a
