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Jan 23, 2025
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Major relief to Mauritius investors as tax board clarifies on new rule
In a major relief for foreign investors in India from Mauritius, Singapore and Cyprus, the Central Board of Direct Taxes (CBDT) has clarified that investments from these countries made prior to April 1, 2017 would be eligible for benign or zero capital gains tax, irrespective of whether the investors’ sole purpose was tax avoidance.
In a fresh guidance note issued on January 21, the tax board said the anti-avoidance measure “Principal Purpose Test (PPT)” agreed to in March last year under a bilateral protocol, would be grandfathered in respect of Mauritius, Singapore and Cyrpus.
The PPT is a provision included in tax treaties between countries that have signed and ratified the ‘Multilateral Instrument’ (MLI), an action plan introduced by the Organisation for Economic Cooperation and Development to address tax avoidance in cross-border arrangements.
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