DTAA Treaty: Income Tax Department expressed concern over India-Mauritius tax treaty, know why?

India Mauritius Tax Treaty: The Income Tax Department has issued an important notification regarding the recent tax treaty between India and Mauritius, which may affect foreign investment from Mauritius. The Income Tax Department has informed that it is yet to approve the rules and guidelines and issue clarifications of the revised Double Taxation Avoidance Agreement (DTAA Treaty) between India and Mauritius.

The two countries signed a tax treaty on March 7. In which a major purpose testing system was determined. The foreign investor has made sure whether he is able to take advantage of this treaty or not. The Income Tax Department expressed concern that foreign investments registered from Mauritius would face scrutiny by tax authorities. Also, investments made in the past will have to be covered under the revised protocol. The Income Tax Department had expressed serious concern over this treaty through a post on social media Forum X.

A new tax treaty has yet to be ratified

The department has said that we would like to clarify in this regard that the tax treaty issued between India and Mauritius has not yet been recognized under Section 90 of the Income Tax Act, 1961. So now there is no problem. But once the guidelines are implemented, necessary steps will have to be taken to allay the apprehensions and concerns.

What is DTAA treaty?

An agreement has been signed on amended rules and guidelines in the Double Taxation Avoidance Agreement between India and Mauritius. This is to create a new system, with the help of which the investor is allowed to claim or not claim the benefits of this treaty. In which a new section 27B, right to benefit, has been added.

The treaty aims to promote bilateral trade and investment, with a focus on preventing tax evasion by increasing bilateral investment.