Income Tax Department Clarifies: Amended India-Mauritius Tax Treaty Not Yet Ratified or Notified
The Income-Tax Department clarifies that the amended India-Mauritius Tax Treaty has not been ratified or notified yet.
On April 12, the Income Tax Department conveyed that the revised India-Mauritius protocol concerning the Double Taxation Avoidance Agreement (DTAA) awaits ratification and notification, according to a PTI report. Signed on March 7, 2024, the amendment to the DTAA between India and Mauritius introduces a Principal Purpose Test (PPT) aimed at mitigating tax avoidance. The PPT ensures that treaty benefits are extended solely to transactions with genuine purposes, thereby addressing apprehensions regarding tax evasion.
Concerns arose that investments routed through Mauritius might encounter heightened scrutiny by tax authorities, potentially encompassing previous investments under the amended protocol. In response, the Income Tax Department, via a social media post on X (formerly known as Twitter), clarified that inquiries regarding the amended DTAA are premature as the protocol is pending ratification and notification under section 90 of the Income-tax Act, 1961. The department assured that any inquiries would be duly handled once the protocol was officially enacted.
This development underscores the significance of regulatory processes in international taxation and underscores the need for clarity and transparency in cross-border transactions. The amended protocol reflects efforts to bolster tax compliance and deter illicit financial practices, aligning with broader global initiatives to combat tax evasion and money laundering.
Furthermore, the reassurance provided by the Income Tax Department aims to allay concerns and provide stakeholders with a clear understanding of the regulatory landscape. By emphasizing the procedural status of the amended protocol, the department seeks to instil confidence in investors and taxpayers, underscoring its commitment to fair and equitable tax administration.
Overall, the pending ratification and notification of the amended India-Mauritius DTAA highlight the meticulous procedural requirements involved in updating international tax agreements. Once ratified and notified, the protocol is expected to enhance tax transparency and strengthen India's regulatory framework for cross-border transactions, contributing to a more robust and equitable tax regime.
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