India–Mauritius DTAA Amendment 2026: New Anti-Abuse Rules
India–Mauritius DTAA Amendment 2026: New Anti-Abuse Rules Notified
1. Background
The Central Government has notified the Protocol amending the Double Taxation Avoidance Convention (DTAA) between India and Mauritius. The amendment aims to prevent the misuse of treaty benefits through tax avoidance arrangements while retaining the Convention’s objective of eliminating double taxation.
The Protocol was signed at Port Louis, Mauritius, on 7 March 2024, and came into force on 10 August 2026, following completion of the required legal procedures by both countries.
The notification has been issued under Section 159(1) of the Income-tax Act, 2025, bringing the Protocol’s provisions into effect in India.
2. Key Amendments to the India–Mauritius DTAA
A. Revised Preamble: Prevention of Treaty Abuse
The Protocol replaces the existing Preamble of the Convention with a revised statement of purpose.
The revised Preamble makes it clear that the DTAA is intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.
It specifically addresses treaty-shopping arrangements, under which residents of third countries may attempt to obtain indirect access to tax benefits available under the India–Mauritius Convention.
Impact: The amendment reinforces the principle that treaty benefits should be used for their intended purpose and not as a mechanism for obtaining unintended tax advantages.
B. Introduction of Article 27B: Entitlement to Benefits
A new Article 27B, titled “Entitlement to Benefits,” has been inserted after Article 27A of the Convention.
Under this provision, a benefit under the DTAA may be denied in respect of an item of income where, after considering all relevant facts and circumstances, it is reasonable to conclude that obtaining the benefit was one of the principal purposes of an arrangement or transaction that directly or indirectly resulted in that benefit.
However, the provision contains an important safeguard. The benefit may still be allowed if it is established that granting it in the circumstances is consistent with the object and purpose of the relevant provisions of the Convention.
Key implications:
- Treaty benefits may be examined in light of the commercial and tax-related purposes of an arrangement.
- Transactions involving intermediary entities or structures designed principally to obtain treaty relief may face closer scrutiny.
- The relevant facts, circumstances and objectives of the arrangement will be important in determining eligibility.
- The exception preserves the possibility of granting treaty relief where doing so is consistent with the intended purpose of the applicable treaty provisions.
This amendment introduces an express treaty-based anti-abuse rule for determining entitlement to benefits.
3. Effective Date
The Protocol entered into force on 10 August 2026, being the date on which the later of the two countries’ notifications confirming completion of their respective legal procedures was issued.
In accordance with Article 3 of the Protocol, its provisions take effect from the date of entry into force, irrespective of when the relevant taxes are levied or the taxable years to which they relate.
Accordingly, the effective date specified in the Protocol is 10 August 2026.
4. Practical Implications for Taxpayers and Businesses
The amendments are particularly relevant to investors, multinational groups, holding companies and other taxpayers seeking relief under the India–Mauritius DTAA.
Taxpayers relying on treaty benefits should consider the following measures:
- Review existing structures: Examine cross-border arrangements involving Mauritius to assess whether their purposes and operations are consistent with the objectives of the Convention.
- Maintain supporting documentation: Preserve evidence of commercial rationale, business activities, decision-making and the economic substance of relevant arrangements, where applicable.
- Assess treaty eligibility: Evaluate the availability of treaty relief in light of the newly inserted Article 27B and the facts of each transaction.
- Review tax positions: Reassess relevant withholding tax positions and treaty-benefit claims where the amendment may affect the analysis.
- Obtain professional advice: Consider the interaction of the amended DTAA with other applicable provisions of Indian tax law and relevant anti-avoidance rules.
The insertion of Article 27B does not mean that every transaction involving Mauritius will automatically lose treaty protection. The provision requires consideration of the relevant facts and circumstances, together with the stated exception concerning the object and purpose of the Convention.
5. Conclusion
The Protocol notified on 13 October 2026 strengthens the anti-abuse framework of the India–Mauritius DTAA through a revised Preamble and the introduction of Article 27B.
The central change is the express authority to deny treaty benefits where obtaining such benefits was one of the principal purposes of an arrangement or transaction, unless granting them is consistent with the object and purpose of the relevant treaty provisions.
Taxpayers and businesses using the India–Mauritius treaty framework should review their existing arrangements and future transactions to ensure that treaty-benefit claims are supported by the applicable legal requirements and the commercial facts.
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