Older investments remain protected under India-Mauritius tax treaty, says PwC expert
The Centre’s latest notification on the Principal Purpose Test (PPT) under the India-Mauritius tax treaty does not change the tax treatment of investments made before April 1, 2017, according to Kunal Shah, tax partner at PwC India.
Shah said these older investments remain protected under the grandfathering rules agreed when India revised its tax treaty with Mauritius. The PPT, an anti-tax avoidance rule, will apply to investors seeking treaty benefits on other income going forward.
“The promise continues,” Shah said, adding that the PPT would not affect grandfathered investments under India’s tax treaties with Mauritius, Singapore and Cyprus. He said the government had already clarified this position in a Central Board of Direct Taxes (CBDT) circular issued in 2025.
The Finance Ministry notified the amendment after the protocol, signed in March 2024, completed the approval process in both India and Mauritius. Shah said it took effect on August 10, 2026, and applies to income covered by the new rules without reopening the tax treatment of protected older investments.
“This PPT will not interfere with grandfathering, but all the other income on which one will still claim treaty benefits, the PPT may still need to get tested going forward,” Shah said.
Shah also said the amendment does not change the legal position arising from the Tiger Global ruling or other anti-avoidance provisions. Tax authorities can continue to examine treaty claims based on the facts of each case, but the protocol itself does not expand their powers over grandfathered investments.
On whether the PPT applies alongside the General Anti-Avoidance Rules (GAAR), Shah said the answer depends on the tax treaty. Under the Mauritius, Singapore and Cyprus treaties, grandfathered investments remain protected from the PPT under the government’s earlier clarification. Under other treaties, both GAAR and the PPT may apply when investors claim tax benefits.
For the full interview, watch the accompanying video
New India-Mauritius tax treaty rules do not affect grandfathered investments: PwC’s Kunal Shah
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