Mauritius Cabinet approves pending Protocol to tax treaty with India

The Mauritius Cabinet approved, on 17 July, the Double Taxation Avoidance Agreement (India) (Amendment) Regulations 2026, which provides for bringing into force the pending Protocol to the 1982 Double Taxation Agreement (DTA) with India.

The Protocol, which was signed on 7 March 2024, is the second to amend the 1982 treaty and includes changes to better align with the DTA with the OECD Base Erosion and Profit Shifting (BEPS) standards. It provides, among other things, for the inclusion of:

• A revised Preamble section to reiterate the common intention of both countries to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance. The phrase “for the encouragement of mutual trade and investment” has been omitted.
• The inclusion of a Principal Purpose Test (PPT) rule to prevent abuse, which allows either party to deny a benefit under the DTA if one of the principal purposes of an investment is to benefit from the DTA.

Having signed the Protocol, the Mauritian government had deferred ratification because of concerns raised by stakeholders and investors in both Mauritius and India. The matter had been raised with Indian Prime Minister Narendra Modi during recent visits to India by the Mauritian Prime Minister.

According to the Mauritius government, Modi gave an assurance that India would not take any action to undermine the benefits of Mauritius under the DTA and, subsequently, the Indian authorities had clarified their stand which was now favourable to Mauritius.

India’s Central Board of Direct Taxes (CBDT) issued Circular No. 1/2025 on 21 January 2025, which stated that:

• The PPT provisions would only apply prospectively from the date that the relevant treaty or Protocol enters into force.
• The grandfathering benefit available under the India-Mauritius DTA for shares acquired before 1 April 2017 remained outside the scope of the PPT and would continue to be governed by the specific treaty provisions.

“This new Protocol reflects the continuing evolution of the Mauritius-India treaty relationship. Importantly, it balances the global move towards stronger anti-abuse provisions with greater certainty for investors,” said Richard Neal, Sovereign’s Commercial Director – Africa.

“For Mauritius, the message is clear: structures must be commercially driven and properly substantiated, but Mauritius continues to have a key role to play in facilitating legitimate cross-border investment into and from India.”

The Protocol will now enter into force on the date of notification to the Indian authorities of the completion of the ratification procedures and will apply from the date of its entry into force.