India-Mauritius DTAA Protocol Notified: Article 27B's PPT.

The Ministry of Finance notified the India-Mauritius DTAA Protocol on 13 October 2026, inserting a new principal-purpose-test Article 27B with effect from 10 August 2026 — what it means for Mauritius-routed funds, FPIs and M&A deals.

The Ministry of Finance's Department of Revenue notified, on 13 October 2026, the Protocol amending the Double Taxation Avoidance Convention (DTAA) between India and Mauritius — over two years after it was signed at Port Louis on 7 March 2024. As reported by multiple tax publications citing the official notification (S.O. 5611(E), issued under Section 159(1) of the Income-tax Act, 2025), the Protocol has in fact been in force since 10 August 2026, once both governments completed their respective ratification steps — Mauritius's Cabinet cleared ratification only in July 2026. For the FPI, private-equity and fund structures that still route into India through Mauritius, and for M&A deals that lean on the treaty's capital-gains position, the detail in this Protocol decides whether a treaty benefit survives scrutiny going forward.

What was notified, and when

• The notification is dated 13 October 2026 and gives effect to the Protocol signed on 7 March 2024.
• Per Article 3 of the Protocol, as reported, the amendments apply from 10 August 2026 — irrespective of when the relevant taxes are levied or which tax year the income relates to. That is the date of entry into force, not the notification date, and the position is not purely prospective from October.
• The Convention's preamble has also been rewritten, now stating explicitly that the treaty's purpose is to eliminate double taxation without creating opportunities for non-taxation, reduced taxation, evasion, avoidance or treaty-shopping.

Article 27B, in plain terms

The Protocol inserts a new Article 27B — "Entitlement to Benefits" — a Principal Purpose Test (PPT) modelled on the OECD's BEPS Action 6 language already familiar from India's Singapore and other updated treaties. In substance: a treaty benefit on an item of income can now be denied where, looking at all the facts and circumstances, it is reasonable to conclude that obtaining that benefit was one of the principal purposes of the arrangement or transaction — unless the taxpayer can show that granting the benefit would still be consistent with the object and purpose of the relevant treaty provision.

This sits alongside, rather than replaces, India's domestic General Anti-Avoidance Rule (GAAR) and the long-standing grandfathering position under CBDT Circular 1/2025, under which shares acquired before 1 April 2017 reportedly remain outside the PPT's scope. Both tests can now apply to the same Mauritius-routed structure.

Why this matters for Mauritius-routed structures

Mauritius lost its old capital-gains advantage once the 2016 Protocol introduced source-based taxation prospectively, but it has continued to be used for FPI registrations, PE/VC holding vehicles and SPVs set up well before GAAR and PPT became routine treaty features. Article 27B means a Mauritius entity with no function beyond accessing the treaty — no local decision-making, no independent commercial rationale, a registered address and little else — is now squarely within a facts-and-circumstances PPT test, on top of GAAR exposure that already existed domestically. A Mauritius layer with genuine substance (regional investment-holding activity across multiple portfolio companies, real decision-makers) sits in a different risk category, but that distinction has to be documented, not assumed. Our DTAA rate checker lets you compare Mauritius's withholding rates against other routes as a starting point, though rate comparison was never the issue this Protocol targets — substance is.

What to do now

• Map which live structures still hold Indian investments through Mauritius — funds, SPVs and holding companies alike — and note the date each was set up relative to 1 April 2017 and to 10 August 2026.
• Document commercial substance behind any Mauritius layer that predates this Protocol: where decisions are actually made, who sits on the board, what the entity does beyond holding India paper.
• For deals signing now, build PPT exposure into tax representations, warranties and indemnity or gross-up clauses wherever a Mauritius counterparty or seller entity is involved.
• For a new fund or SPV being set up, weigh Mauritius against GIFT City IFSC or a direct structure — the substance bar has moved for all of them, but the compliance shape differs.

How Advisory Monks Consulting helps

We run substance and treaty-risk reviews for Mauritius-routed holding structures and FPI/fund vehicles, map exposure under both GAAR and the new PPT, and work through the VC & Investor Legal and Flip Structuring desks on restructuring where a Mauritius layer no longer earns its keep. For a live deal, we can turn around a PPT risk read on the counterparty structure within days — speak with a partner before signing.

This note is general guidance, not tax or legal advice. Positions depend on your specific facts — speak with a partner before acting.