The Indian government has revoked tax benefits for foreign portfolio investors (FPIs) originating from Mauritius, signaling stricter regulations following the revision of the India-Mauritius tax treaty.
In a move aimed at curbing treaty abuse, the amendment introduces a Principle Purpose Test (PPT), requiring FPIs to justify their choice of jurisdiction beyond tax advantages alone.
Historically, many international funds have routed investments through Mauritius, Singapore, the Netherlands, or Luxembourg to benefit from favorable tax arrangements with India. However, the revised treaty seeks to align with OECD standards, prompting Mauritius to amend its Double Taxation Avoidance Agreement (DTAA) with India.
While the changes intend to promote fair tax practices, FPIs from Mauritius may now face heightened scrutiny, emphasizing the importance of compliance with evolving regulatory frameworks in cross-border investments.
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