The India-Mauritius DTAA, in force since 1983, was significantly amended by a 2016 Protocol that introduced source-based capital gains taxation in India on shares acquired on or after 1 April 2017, while grandfathering shares acquired before that date; a further Protocol signed 7 March 2024 adds a Principal Purpose Test anti-abuse rule, which Mauritius ratified on 17 July 2026 while India's ratification remained pending, so it had not yet entered into force as of that date.
The 2016 Protocol -- ending the old capital gains exemption
For decades, the India-Mauritius DTAA (in force since 1983) exempted capital gains on the sale of Indian
shares from Indian tax when the seller was a Mauritius tax resident, a structure that made Mauritius the
largest single source of foreign investment into India for many years. A 2016 Protocol closed this route
going forward: shares acquired on or after 1 April 2017 became subject to source-based capital gains taxation
in India (at a transitional reduced rate for a defined window, then the full applicable rate thereafter),
while shares acquired before 1 April 2017 remained grandfathered under the older exemption. This distinction
-- acquisition date relative to 1 April 2017 -- remains central to how a Mauritius-based investor's Indian
share gains are taxed today.
The 2024 Protocol -- a Principal Purpose Test, still pending ratification
A further Protocol, signed on 7 March 2024, adds a Principal Purpose Test (PPT) to the treaty, an
anti-abuse rule consistent with the OECD/G20 BEPS minimum standards, under which a treaty benefit can be
denied where obtaining that benefit was one of the principal purposes of an arrangement. As of an EY alert
dated 22 July 2026, Mauritius's Cabinet had approved ratification on 17 July 2026, while India's own
ratification remained pending -- since a protocol enters into force only once both countries notify each
other of completed domestic procedures, the 2024 Protocol had not yet taken effect as of that date. India has
separately issued guidance (circulars in January 2025 and April 2026) on how the PPT is expected to apply,
including grandfathering relief referenced for investments made before 31 March 2017. Confirm the current
ratification and entry-into-force status before relying on any specific PPT provision.
What this means for an individual NRI in Mauritius, as distinct from GBC investment structures
Much of the 2016 and 2024 Protocol commentary is written for institutional and fund-structuring audiences
using Mauritius Global Business Companies (GBCs) to invest into India -- but an individual NRI resident in
Mauritius selling personally-held Indian shares, mutual fund units, or property is subject to the same
underlying source-based taxation and treaty-relief framework, just without the additional layer of
fund-structure-specific anti-abuse scrutiny that applies to GBC investment vehicles. For income like rental
income, salary, or property sale proceeds unrelated to listed securities, ordinary Indian tax rules (TDS under
Section 195 on payments to non-residents, and the DTAA's other articles) apply in the same way they do for
NRIs in other countries.
Common mistakes made in this area:
- Assuming the pre-2016 blanket capital gains exemption still applies to all Mauritius-resident
sellers -- it only continues to apply to shares acquired before 1 April 2017.
- Treating GBC-specific commentary about the Protocols as directly applicable to a simple individual
share sale without checking whether the same considerations actually apply.
- Not confirming the current ratification status of the 2024 Protocol before assuming its PPT
provisions are already in force.
