India-Mauritius DTAA after the 2016 protocol and 2024 amendment

The India-Mauritius treaty was the single largest source of FDI into India for two decades, driven by the original capital-gains exemption. The 2016 protocol (effective 1 April 2017) ended the exemption for post-cutoff acquisitions, mirroring the Singapore amendment. The MLI brought a PPT in 2019. The 2024 amending protocol added a principal-purpose-test article directly into the treaty text and tightened the LOB. The combined effect: Mauritius now competes on substance and operations, not pure tax arbitrage.

Pre-1 April 2017 acquisitions of Indian shares retain the original Article 13(4) exemption: capital gains taxable only in Mauritius. Acquisitions between 1 April 2017 and 31 March 2019 paid 50% of the Indian rate during the transition. From 1 April 2019, full Indian capital gains tax applies. Grandfathered shareholdings are still relevant for older funds, but new investments through Mauritius receive no capital-gains shelter under the treaty. The dividends article was also amended to remove the 5% concessional rate; standard 5-15% based on shareholding now applies.

The original LOB required annual operating expenditure of at least MUR 1.5 million (approximately USD 35,000) for entities accessing the residual treaty benefits and the transitional 50% rate. The 2024 protocol added a principal-purpose-test article that overrides the LOB and asks whether one of the principal purposes of an arrangement was treaty benefit. Mauritius entities with real management, employees, board independence and core income-generating activities pass; pure SPVs do not. The FSC now demands enhanced substance for Category 1 Global Business Licences.

Interest is capped at 7.5% under Article 11 (the lowest of any Indian treaty). Royalties are capped at 15% under Article 12. There is no separate FTS article in the India-Mauritius treaty - fees for technical services are treated as business profits under Article 7 and are taxable in India only if the Mauritian recipient has a PE in India. This FTS gap is the one remaining headline benefit: cross-border consulting and software fees from India to a Mauritian vendor can escape Indian withholding entirely if PE is avoided.

Mauritius remains useful for three patterns: alternative investment funds (the Variable Capital Company under the 2022 Act provides a flexible vehicle); IP ownership for African and Indian Ocean operations where the Mauritius treaty network shines; and family-office consolidation under the GBC1 regime. For Indian founders building tech, a Mauritius holdco for Indian operations is no longer competitive against Singapore or GIFT City unless the Africa angle is real. Always pair a Mauritius structure with a substance plan that survives a real audit, not a paperwork audit.

Are pre-2017 Mauritius shareholdings still tax-free on exit?
Yes. The 2016 protocol grandfathered Indian shares acquired before 1 April 2017. Capital gains on those shareholdings remain taxable only in Mauritius under the original Article 13(4). Document the acquisition date carefully.

What is the FTS treatment under the India-Mauritius treaty?
There is no separate FTS article. Fees for technical services are treated as business profits under Article 7, so they are taxable in India only if the Mauritian vendor has a PE in India. This is the treaty's most useful surviving feature.

Does the 2024 protocol have retrospective effect?
The principal-purpose test applies prospectively from when the protocol comes into force, but Indian assessing officers have argued PPT principles apply to ongoing structures regardless of acquisition date. Substance is the only defence.

What is the minimum substance for a Mauritius holdco?
Operating expenditure of MUR 1.5 million (approximately USD 35,000) annually, two resident directors, board meetings in Mauritius, principal bank account locally, and core income-generating activities conducted from Mauritius.

What is the withholding rate on interest from India to Mauritius?
Article 11 caps interest at 7.5% - the lowest of any Indian treaty. This makes Mauritius attractive for cross-border debt structures, subject to thin-capitalisation rules in Section 94B and substance requirements.

Is Mauritius still relevant after Singapore and GIFT City?
For India-only investing, no. For Africa-facing operations, fund structures using the Variable Capital Company, and IP holdcos where the broader Mauritius treaty network helps, Mauritius retains a niche.