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Government to review tax treaty with Mauritius

06 Sep 2012 Evaluate

The government of India has confirmed its proposal to review the India-Mauritius Double Taxation Avoidance Convention (DTAC) bilaterally to put in place adequate safeguards to prevent misuse of DTAC and also to strengthen tax information exchange mechanism between the two countries. A Joint Working Group (JWG) comprising members from the Government of India and the Government of Mauritius has already conducted eight rounds of discussions for finding mutually acceptable solution for addressing the concerns.

The prevailing DTAC between India and Mauritius was notified in 1983. As per that, taxation of capital gains arising from alienation of shares is provided only in the residence country of the investor. Under the domestic laws of Mauritius the capital gains within the country is fully exempted from taxation. Hence, an investor routing his investment through Mauritius into India does not have to pay capital gains tax either in India or Mauritius.

This has made Mauritius an attractive route for investment by the third country residents into India through treaty abuse.

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