Officials can deny benefits if tax relief found sole motive

The finance ministry notified amendments to the India-Mauritius Double Taxation Avoidance Agreement (DTAA) on Tuesday, introducing a Principal Purpose Test (PPT) at the treaty level. The protocol, signed in March 2024, came into force on August 10, 2026.

The change has significant implications for foreign portfolio investors, private equity funds, multinational companies and holding entities investing in India via Mauritius. Mauritius accounts for approximately $185.21 billion (or about 23.82%) of India's cumulative foreign direct investment (FDI) equity inflows from April 2000 through December 2025, official data from the Department for Promotion of Industry and Internal Trade (DPIIT) showed.

Relief may still be available if granting it is consistent with the object and purpose of the relevant treaty provisions.

"The introduction of the Principal Purpose Test (PPT) adds another anti-abuse tool to the India-Mauritius tax treaty and is likely to have a significant bearing on how investment structures and treaty claims are assessed going forward," said Richa Sawhney, partner, Tax, Grant Thornton Bharat.