On 10 May 2016, India and Mauritius signed a protocol amending their double taxation agreement.
The amendments provides that India has the right to tax capital gains arising from the alienation of shares acquired on or after 1 April 2017 in an Indian company, with effect from the 2017/2018 financial year.
The protocol notes that a resident is deemed to be a shell or conduit company if its total expenditure on Mauritian-based operations is less than INR2.7m (US$40,473), in the proceeding 12 months.
The protocol also updates Article 26 of the tax treaty, on the exchange of information, in order to provide assistance for tax collection purposes.
The Central Board of Direct Taxes added the following statement: “The protocol will tackle the long-pending issues of treaty abuse and round-tripping of funds attributed to the India – Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment, and stimulate the flow of exchange of information between India and Mauritius.”