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Through Notification No. 68/2016, the Government of India has ratified a Protocol to its tax treaty with Mauritius.
The protocol was signed on May 10, 2016, in Mauritius, in a bid to limit abuse of the India-Mauritius double tax avoidance agreement. The protocol provides India with the right to tax capital gains arising from the alienation of shares acquired on or after April 1, 2017, in an Indian company with effect from the 2017/18 financial year.
The protocol also updates Article 26 of the tax treaty, on exchange of information, and introduces a new Article 26A in the treaty to facilitate collection of taxes.
Announcing the changes to the tax treaty, the CBDT said on May 10: "The protocol will tackle the long-pending issues of treaty abuse and round-tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment, and stimulate the flow of exchange of information between India and Mauritius."
It added: "It will improve transparency in tax matters and will help curb tax evasion and tax avoidance. At the same time, existing investments, i.e. investments made before April 1, 2017, have been grandfathered and will not be subject to capital gains tax in India."
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