Tax benefits to be slashed as India, Mauritius ink new deal

THE TAX BENEFITS for investors based out of Mauritius in India are set to be reduced substantially further, with the two countries signing a protocol to amend the convention encompassing the bilateral Double Taxation Avoidance Agreement (DTAA).

- PRIYANSH VERMA

The agreement signed by the two sides on March 7 at Port Louis -FE has seen a copy of it - is the first of its kind for New Delhi.

It will, for all practical purposes, result in denial of tax reliefs for assorted incomes - dividend, royalty, technical fee etc - to investors and traders from the island nation.

Indian high net worth individuals (HNIS), who take the island route for tax avoidance, will also be impacted.

Tax experts also said once the amendments take effect both countries will have to notify them in due course - the benefit of nil capital gains tax for investments from Mauritius made before April 1, 2017, too, could come under the scanner, as the amendments "seemed to have retrospective effect".

A 2016 amendment to the DTAA, it may be recalled, had ended the virtual zero capital gains tax benefit for Mauritius investors, by making gains from sale of shares purchased after April 1, 2017 taxable at India's rates.

The DTAA, which allowed the lower of the tax rates among the signatory countries to prevail, meant nil tax capital tax liability for investors, as the African nation kept the rate zero.

The latest protocol is in compliance with the OECD-anchored plan to reinforce anti-abuse provisions, under the so-called base erosion and profit sharing (BEPS) framework.