Context

• Recently India and Mauritius have signed an agreement on rules and guidelines for amendment of the Double Taxation Avoidance Treaty (DTAA). 
• It provides a mechanism to decide whether a foreign investor is eligible to claim treaty benefits or not.

Key Points

• It is noteworthy that a new section ‘27B right to profit’ has been added to the rules.
• In this, a provision of ‘Principal Purpose Test’ (PPT) has been made. Its objective is to ensure that treaty benefits accrue only to transactions with a genuine purpose and to reduce taxation avoidance.
• If any investment is sold after the implementation of this agreement, only the capital gains tax arising from it will be affected.
• It may be noted that India and Mauritius entered into a Double Taxation Avoidance Agreement (DTAA) in 1982 so that non-resident investors could avoid paying double taxes.
• The amended treaty aims to curb tax evasion and tax evasion.
• The amendment to the India-Mauritius treaty was signed at Port Louis on 7 March.

About double taxation

• Double taxation is a tax principle that refers to instances where the same source of income is taxed twice.
• This can happen when income is taxed at both the corporate and individual levels.
• Double taxation can also occur in the context of international trade or investment when the same income is taxed in two different countries

Important Facts For exam

Mauritius

• Capital: Port Louis
• Currency: Mauritian Rupee
• Official language: English
• Prime minister: Pravind Jugnauth