Mauritius has ratified a tax protocol that is set to widen the powers of Indian tax authorities when they examine offshore structures linked to foreign investors. The move is aimed at giving officials in India a stronger basis to question entities that may have been set up mainly to avoid taxes.
A key change is the ability for Indian authorities to more directly challenge offshore arms when they suspect tax evasion. That could increase scrutiny of investment structures routed through Mauritius, a jurisdiction long associated with cross-border flows into India.
The updated framework also brings in the principal purpose test, a rule designed to block treaty benefits when one of the main goals of an arrangement is tax avoidance. In practice, that means entities may find it harder to rely on treaty protections if tax authorities believe the structure lacks a genuine commercial purpose.
The development signals a tougher stance on treaty abuse and offshore tax planning under the India-Mauritius tax relationship. For investors using Mauritius-based entities, the ratified protocol points to closer examination of how those structures are formed and why they are being used.
