Double Tax Avoidance Agreement (DTAA) Between India and Mauritius

The Double Tax Avoidance Agreement (DTAA) is a treaty signed between two countries to prevent taxpayers from paying double taxes. For example, if an Indian works in a company in Mauritius, they might have to pay taxes in both countries, which the DTAA wants to prevent. 

India has signed DTAA with almost 100 nations in total to safeguard non-resident Indians from double taxation. This agreement ensures that countries involved have agreed upon tax rates on income arising from their country. Keep reading to learn more about India Mauritius DTAA.

What is DTAA Between India and Mauritius?

The Government of India and the Government of Mauritius came to a unanimous decision on 6th December 1983 regarding the avoidance of double taxation. The conventions of DTAA signed between India and Mauritius will be applicable to residents of one or both contracting states. On 7th March 2024, India and Mauritius signed a protocol amending the DTAA. A key point of revision was the introduction of a new article to satisfy the principal purpose test. However it is to be noted that the protocol is yet to be ratified.

This agreement has a total of 6 chapters with further divisions into 38 Articles. These articles mainly discuss the scope of the agreement, definitions, taxation on income, the technique for elimination of double taxation, special provisions and final provisions.

India-Mauritius DTAA will certainly work wonders for encouraging mutual trade and investment in both countries. Due to this DTAA, residents of contracting states will get a deduction on tax payments that they already pay in the other contracting state.

Significance of India Mauritius DTAA for Both Countries

Taxpayers can get multiple benefits under the signed DTAA between India and Mauritius. This agreement will help prevent financial evasion in regard to income earned and capital gains. Following is a list of other benefits that residents of both the contracting states will get:

• The agreement offers relief by exempting tax on income in the resident country that residents earn in another nation. 
• Lower withholding tax rates for taxpayers, so they have to pay lower TDS on incomes like interest, dividends, and royalties in India.
• This agreement ensures that contracting states follow specific rules to apply taxes on the international income of residents of contracting states.
• This agreement offers an anti-abuse provision that ensures that the benefits of this convention are only applicable to genuine residents of both countries.
• In some cases, residents of contracting nations get tax at concessions rates according to the provisions of the DTAA.
• This agreement ultimately makes both countries attractive for investment by offering a chance to avoid double taxation along with other tax benefits.

Taxes Covered Under DTAA

Article 2 of the agreement talks about all the taxes to which the India-Mauritius DTAA will be applicable:

In the case of India (Indian Tax)

• Income tax along with any surcharge applicable on it as per the Income Tax Act of 1961.
• Surtax applicable as per Companies (Profits) Surtax Act of 1964.

In the case of Mauritius (Mauritius Tax)

• Income Tax

As per the decisions made in the convention, apart from the taxes discussed above, any other tax which is substantially identical or similar and is imposed additional after the date of signature of the agreement between the two contracting states will be eligible for DTAA. 

If any tax is applicable in place of any other present in the list above, that would also be part of the DTAA. Competent authorities of the contracting states need to notify each other regarding any significant changes in respective taxation laws.

India-Mauritius DTAA TDS Rates

When a non-resident or foreign company receives payment, a certain portion of it is withheld at the source. This is known as tax deducted at source or TDS. Tax is deductible on the income of residents of contracting states as per the rates prescribed in DTAA. 

According to India Mauritius DTAA, the withholding tax rate applicable in case of dividend payment is 5% if the recipient owns 10% of the capital of the company which is paying dividends. In any other cases of dividend payment, there will be a deduction of 15% of the gross amount.

In case of interest payment, as per Article 11 of the agreement, tax chargeable should not exceed 7.5% of the gross amount. According to Article 12, the tax applicable on royalties that a non-resident will receive will not exceed 15%. Lastly, fees for technical services will be taxable at 10% of the gross amount.  

Taxation on Capital Gains under DTAA

Rules of taxation applicable to capital gains is stated in Article 13 of the DTAA between India and Mauritius. Following is the list of taxation rules applicable for capital gains of different types:

• Capital gains from immovable property that include equipment used in agriculture and forestry and livestock will be  taxable in the contracting state where it is situated.
• Income that a resident of any of the contracting states earns from shares bought on or after 1st April 2017 will be taxable in that state only. However, the tax rate applicable on income earned from 1st April 2017 to 31st March 2019 will not exceed 50%.
• Gains from moveable property that is part of business property in a contracting state but utilised in the other contracting state will be taxed in the other state. 
• Gains from aircraft and ships operating in international traffic are taxable in the contracting state where the enterprise is situated.
• Lastly, income gained from the sale, exchange or transfer of any other property than the ones mentioned above is taxable in the contracting state of which the alienator is a resident.

Final Word

If you are a non-resident Indian residing in Mauritius, you can opt for the benefits laid out in the DTAA between India and Mauritius. However, to avail benefits, you will need documents like a PAN card, Passport, Visa, Tax Residency certificate and Person of Indian Origin proof.

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