India on Tuesday amended its Double Taxation Avoidance Agreement (DTAA) with Mauritius which gives New Delhi the rights to levy capital gains on sale of shares by Mauritius companies.
The protocol also gives protection to investment in shares acquired before April 1, 2017.
“With this protocol, India gets taxation rights on capital gains arising from alienation of shares acquired on or after April 1, 2017 in a company resident in India with effect from financial year 2017-18, while simultaneously protection to investments in shares acquired before April 1, 2017 has also been provided,” the finance ministry said in a statement.
“In respect of such capital gains arising during the transition period from April 1, 2017 to March 31, 2019, the tax rate will be limited to 50% of the domestic tax rate of India, subject to the fulfilment of the conditions in the Limitation of Benefits Article. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards,” the statement said.
It said, the interest arising in India to Mauritian resident banks will be subject to withholding tax in India at the rate of 7.5% in respect of debt claims or loans made after March 31, 2017.
However, interest income of Mauritian resident banks in respect of debt-claims existing on or before March 31, 2017 shall be exempt from tax in India.
The protocol also provides for updation of Exchange of Information Article as per international standard, provision for assistance in collection of taxes, source-based taxation of other income, amongst other changes.
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