🇮🇳 India — 🇲🇺 Mauritius

Tax Treaty / Double Tax Avoidance Agreement detail

The India-Mauritius Double Taxation Avoidance Convention was signed in 1982 and entered into force in 1983. For over three decades it was arguably the most important—and most controversial—tax treaty in India, serving as the preferred routing jurisdiction for a vast proportion of foreign direct investment into India due to its historically favourable capital gains provisions. Under the original treaty, capital gains arising in India from the sale of Indian shares were taxable exclusively in Mauritius, which imposed no capital gains tax, creating an effective zero-tax route. This led to massive investment flows through Mauritian holding companies. A protocol signed in May 2016 fundamentally altered this position: capital gains from shares acquired on or after 1 April 2017 are now taxable in India, with a grandfathering provision for shares acquired before that date and a transitional 50% tax relief for gains on investments made between 1 April 2017 and 31 March 2019. Dividends are now subject to 5% withholding for companies owning at least 10% of the paying company, and 15% for other dividends, following the 2016 protocol amendments. Interest payments to Mauritian residents are exempt from Indian withholding. Royalties face 15% withholding. The 2016 protocol also tightened the residency rules to combat shell companies: a Mauritian company now qualifies as a treaty resident only if its total expenditure on operations in Mauritius exceeds INR 2.7 million (approximately USD 33,000) per year. This Limitation on Benefits provision substantially reduced treaty shopping through substance-free Mauritian entities. The treaty remains important for genuine Mauritius-based holding structures with real operational substance.