India Remains Attractive Investment Destination as DTAA Concerns Resolved, Says Mauritius Minister
India remains a highly attractive destination for global capital, supported by strong economic fundamentals and an ambition to expand into a $5 trillion economy by fiscal year 2028-2029, according to Jyoti Jeetun, the Minister of Financial Services and Economic Planning of Mauritius. In an interview with The Hindu, Ms. Jeetun highlighted that the Mauritian Cabinet recently ratified the amended Double Taxation Avoidance Agreement (DTAA) with India, noting that lingering investor concerns surrounding tax avoidance rules have been cleared.
What Happened
The bilateral DTAA, initially established in 1982, has served as a foundational mechanism for cross-border investments between India and Mauritius for four decades. Over the years, authorities from both countries worked to address concerns regarding the use of shell companies routing funds solely to obtain tax advantages without establishing genuine business operations.
A major revision occurred in 2016, establishing source-based taxation on capital gains for shares acquired on or after April 1, 2017. In March 2024, the previous Mauritian administration signed an amendment introducing the Principal Purpose Test (PPT), which empowers India to deny treaty tax benefits if receiving such benefits was the principal purpose behind an investment structure. Following consultations between the two countries, the Mauritian Cabinet ratified the protocol in July 2026 under the government that assumed office in November 2024.
Key Highlights
- Significant FDI Contribution: According to data from the Department for Promotion of Industry and Internal Trade (DPIIT), Mauritius contributed roughly $6.6 billion or 11.2% of the total FDI inflows into India during 2025-26, placing it second behind Singapore.
- Cumulative Investment: Between April 2000 and March 2026, Mauritius accounted for $186 billion in foreign direct investment, representing nearly one-quarter of India’s total inbound FDI across that span.
- Shift in Ranking: Following the 2016 protocol allowing capital gains taxation, Mauritius transitioned from being the primary source of inbound FDI into India to consistently ranking as the second or third largest.
- Administrative Clarifications: In January 2025, India’s Central Board of Direct Taxes (CBDT) confirmed that PPT provisions would apply purely prospectively. Furthermore, in March 2026, the CBDT released the Income Tax (Amendment) Rules 2026 to offer regulatory certainty for legacy investments.
Why This Matters
The resolution of investor ambiguities is designed to ensure stability for cross-border capital while preventing abusive tax planning. Ms. Jeetun noted that 18 months of constructive engagement between Indian authorities and Mauritius have helped restore investor confidence, ensuring that inbound investments backed by real economic substance, commercial rationale, and regulatory compliance continue without friction.
What to Watch Next
Although the Mauritian Cabinet has formally ratified the protocol, the amended DTAA provisions still require official notification by both the Indian and Mauritian governments before the new rules formally take effect.
Frequently Asked Questions
What is the Principal Purpose Test (PPT)?
The Principal Purpose Test is a treaty mechanism stipulating that if obtaining tax advantages is identified as the primary reason for routing investments through Mauritius, Indian tax authorities are permitted to deny those treaty benefits.
Are existing or legacy investments affected by the PPT?
No. The CBDT stated in January 2025 that the PPT will operate prospectively once brought into effect, and it introduced the Income Tax (Amendment) Rules 2026 specifically to safeguard legacy investments.
When does the amended treaty come into force?
The amendment will officially come into effect once both the Indian and Mauritian governments issue formal notifications through their respective official channels.
Source: Interview published by The Hindu.