India-Mauritius DTAA: Complete Guide to the Double Taxation Avoidance Agreement

Quick answer: The India-Mauritius DTAA caps dividends at 5% (10%+ direct holding) or 15% (all other cases), interest at 7.5%, and fees for technical services at 10% — but royalties are capped at a flat 15%, well above the 10% cap in many of India's other treaties, with no beneficial-owner condition. Signed on 24 August 1982 and in force from 6 December 1983, the treaty was substantially reworked by a 2016 Protocol that added the 7.5% interest cap, a separate FTS article, and source-state taxation of post-2017 share gains. Mauritius did not notify the treaty under the OECD's Multilateral Instrument (MLI), so it is not a Covered Tax Agreement and the MLI's Principal Purpose Test does not apply.

Key takeaways:

• Dividends: 5% for a 10%+ direct shareholding, 15% in all other cases (Article 10(2))
• Interest: 7.5% general cap since 1 April 2017; before that, Article 11(2) had no cap at all
• Royalties: a flat 15% — not 10% — with no beneficial-owner condition (Article 12(2))
• Fees for technical services: 10%, in a separate Article 12A only since 1 April 2017
• Shares acquired before 1 April 2017 stay taxable only in Mauritius under Article 13(4); shares acquired on or after that date are taxable in India under Article 13(3A)
• Mauritius did not list India under the MLI, so this treaty is not modified by the MLI

Overview of the India-Mauritius DTAA

The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius — formally the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and for the encouragement of mutual trade and investment — has governed cross-border taxation between the two countries since 1983. Mauritius has long been a major source of foreign investment into India, and the treaty's capital gains provisions have shaped decades of inbound investment structuring. It covers dividends, interest, royalties, fees for technical services, business profits, capital gains, and employment income, and the only protocol in force is the 2016 Protocol, effective 1 April 2017.

Treaty History and Current Status

The India-Mauritius DTAA was signed at Port Louis on 24 August 1982 and entered into force on 6 December 1983. (The Income Tax Department's own summary header lists the signature year as 1983, but the treaty text is itself dated and executed "this 24th day of August, 1982," which is the operative date.) It has effect in India for assessment years from 1 April 1983, and in Mauritius from assessment years from 1 July 1983.

The 2016 Protocol, signed at Mauritius on 10 May 2016 and in force from 19 July 2016 (Notification No. S.O. 2680(E), dated 10 August 2016), inserted the services PE clause, the 7.5% interest cap and bank-interest exemption, Article 12A on fees for technical services, the capital gains rules in Article 13(3A)-(3B), a source-state right over "other income" (Article 22(3)), updated exchange-of-information articles, and the Limitation of Benefits Article 27A — most effective in India from 1 April 2017, capital gains from AY 2018-19, and information exchange immediately from 19 July 2016.

Both India and Mauritius are parties to the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). India listed its treaty with Mauritius as Covered Tax Agreement No. 48. Mauritius, however, did not list India in either its signature-stage or definitive MLI position — and a treaty is modified only when both parties notify it. The India-Mauritius DTAA is therefore not a Covered Tax Agreement: the Principal Purpose Test (PPT) does not apply. Anti-abuse scrutiny instead rests on the treaty's own (now largely spent) Limitation of Benefits article, the beneficial-ownership conditions in Articles 10, 11 and 12A, and India's domestic General Anti-Avoidance Rules (GAAR). A further Protocol was signed on 7 March 2024, adding a Principal Purpose Test and a revised preamble, but it is not in force.

The treaty follows a Hybrid model: UN-style features include a warehouse and a farm or plantation as listed PEs, a nine-month construction-and-assembly threshold, and a 90-day services PE clause, while Article 7 is clean OECD-style with no force-of-attraction rule. Article 2 covers Indian income tax including surcharge (and the abolished Companies (Profits) Surtax Act, 1964, surviving only as treaty text) and, for Mauritius, simply income tax — no capital or wealth tax is covered, despite "capital gains" in the title.

Residence and the Tie-Breaker Rule

Where an individual is dual-resident, Article 4(2) applies a cascading tie-breaker: permanent home; then closer personal and economic ties ("centre of vital interests"); then habitual abode; then nationality, with unresolved cases referred to mutual agreement. For a company, Article 4(3) applies a single test: the State in which its place of effective management is situated — not the MLI's competent-authority approach used in Covered Tax Agreements, since this treaty is not one.

Permanent Establishment Rules

Article 5(1) defines a permanent establishment (PE) as a fixed place of business through which an enterprise's business is wholly or partly carried on. Article 5(2) lists inclusions: a place of management, branch, office, factory, workshop, a mine, oil or gas well, quarry or other place of extraction of natural resources, and — reflecting UN Model influence — a warehouse in relation to a person providing storage facilities for others, and a firm, plantation or other place where agricultural, forestry, plantation or related activities are carried on. There is no separate deemed PE for oil-and-gas services as in some other Indian treaties.

Construction, Assembly and Services PE

Article 5(2)(i) deems a PE where "a building site or construction or assembly project or supervisory activities in connection therewith" continues for more than nine months — note the treaty says "assembly," not "installation." Article 5(2)(j), inserted by the 2016 Protocol from 1 April 2017, deems a services PE where personnel furnish services, including consultancy, for the same or a connected project, for periods aggregating more than 90 days within any 12-month period. There is no carve-out for fees already covered by FTS — Article 12A(4) routes PE-connected FTS to Article 7 once a PE exists.

Agency PE and Exclusions

Article 5(4) deems a dependent agent to create a PE in two situations only: habitually concluding contracts in the enterprise's name (other than purchasing), or habitually maintaining a stock from which the agent regularly fulfils orders — there is no separate "habitually securing orders" limb found in some other Indian treaties. Article 5(5) excludes an independent agent acting in the ordinary course of business, unless devoted almost exclusively to one enterprise. Article 5(3) excludes preparatory or auxiliary activities such as storage, display, purchasing, or information-gathering.

Business Profits — Article 7

Business profits are taxable only in the enterprise's home State unless it carries on business in the other State through a PE, in which case only profits attributable to the PE are taxable there, computed on an arm's-length basis. Head-office expenses, including executive and general administrative expenses, are deductible whether incurred in India or elsewhere (Article 7(3)), and profits may be estimated on a reasonable basis where attribution presents exceptional difficulties (Article 7(2)). A foreign company's PE profits are taxed at the foreign-company rate of 35%, plus surcharge and cess.

Dividends, Interest, Royalties and Fees for Technical Services

Dividends — Article 10

Dividends paid by an Indian company to a Mauritius resident may be taxed in India, capped at 5% of the gross amount where the beneficial owner is a company holding directly at least 10% of the capital of the paying company (Article 10(2)(a)), and 15% in all other cases (Article 10(2)(b)) — an unusually low 10% threshold; Singapore, for comparison, requires 25%. Article 10(3) separately lets Mauritius tax dividends its own resident company pays where those dividends are deductible against the payer's profits — a Mauritius-side rule with no bearing on Indian withholding.

Interest — Article 11

Interest arising in India and beneficially owned by a Mauritius resident is capped at 7.5% of the gross amount (Article 11(2)) — but only since the 2016 Protocol took effect on 1 April 2017; before that date, Article 11(2) imposed no treaty cap at all. Recipient-side exemptions apply to the Government or a local authority of the other State, or an agency it created (Article 11(3)); to a bank carrying on bona fide banking business, but only for debt-claims existing on or before 31 March 2017 (Article 11(3A)) — a closed, legacy class; and, to the extent approved by the payer State's government, for other government-approved transactions (Article 11(4)). None of these limbs names a specific institution; every exemption is written by category and applies reciprocally.

Royalties — Article 12

Royalties are capped at a flat 15% of the gross amount (Article 12(2)) — notably higher than the 10% cap in many of India's comparable agreements. Unusually, Article 12(2) carries no beneficial-owner requirement and no equipment or reduced-rate tier; it is a single flat cap.

Fees for Technical Services — Article 12A

FTS is governed by a wholly separate article, Article 12A, inserted by the 2016 Protocol from 1 April 2017; before that date the treaty had no FTS article, and Mauritius-source technical fees fell to Article 7 (PE required) or the pre-amendment, residence-only Article 22. Article 12A(2) caps FTS at 10% where the beneficial owner is a resident of the other State, defined broadly as managerial, technical, or consultancy services "including the provision of services of technical or other personnel" — there is no "make available" limb, subject only to carve-outs for independent personal services (Article 14) and employment (Article 15). Where any of these four income types is PE-connected, the relevant article routes it instead to Article 7 or Article 14 at ordinary rates.

Withholding Tax Rates Summary

The taxpayer may apply whichever rate is more beneficial, under section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961). See our dedicated withholding tax rates page for India to Mauritius for the full article-by-article breakdown.

Capital Gains — Article 13

Article 13, as amended by the 2016 Protocol, is the treaty's most consequential provision for foreign portfolio and private-equity investors. Immovable-property gains are taxable where the property is situated (Article 13(1)); PE-asset gains are taxable in the PE State (Article 13(2)); and ship/aircraft gains are taxable only where the enterprise's place of effective management is situated (Article 13(3)).

Shares: the 1 April 2017 dividing line

The 2016 Protocol inserted Article 13(3A): gains from shares acquired on or after 1 April 2017 may be taxed by the company's resident State — unconditionally, with no land-rich test, minimum shareholding, or buyer-side condition. Article 13(3B) capped such gains at 50% of the domestic rate for a transition window running to 31 March 2019; that window has now closed, so India taxes such gains today at ordinary domestic rates.

Shares acquired before 1 April 2017 fall instead into the residual, residence-only Article 13(4) — taxable exclusively in Mauritius, indefinitely. This is the treaty's well-known "grandfathering," and it carries no sunset date. CBDT Circular No. 682 of 30 March 1994 records that a Mauritius resident alienating shares of Indian companies "will not have any capital gains tax liability in India" — a statement made when Article 13(4) still covered every share, and now confined to shares acquired before 1 April 2017. Debentures, units, and partnership interests remain in Article 13(4) regardless of acquisition date.

The Limitation of Benefits — Article 27A

The 2016 Protocol also inserted Article 27A, a Limitation of Benefits (LOB) clause — but its scope is narrow: every paragraph refers only to "the benefits of Article 13(3B)." It denies that transition rate to primary-purpose arrangements and to a "shell/conduit company" deemed to exist where operating expenditure is below Mauritian Rs. 1,500,000 or Indian Rs. 2,700,000 in the preceding 12 months (carve-out for stock-exchange-listed entities). Because the 13(3B) window closed on 31 March 2019, Article 27A is now a spent provision — it never touched dividends, interest, royalties, or FTS, and has no bearing on the Article 13(4) grandfathering. There is no general LOB clause and no most-favoured-nation clause in this treaty.

Elimination of Double Taxation, MAP and Tax Residency

Article 23 gives India ordinary credit for Mauritius tax paid, capped at the Indian tax attributable to the Mauritius-source income, plus an underlying-tax credit where an Indian company holds at least 10% of the Mauritius payer's shares — mirrored from the Mauritius side. Article 23(3) also provides tax sparing in India's favour for Mauritius incentives under the Mauritius Income-tax Act, 1974, with no sunset date; a mirror clause spares certain (mostly long-repealed) Indian incentive provisions for Mauritius's benefit.

Article 25 provides a Mutual Agreement Procedure (MAP): a resident may present a case to their residence-State competent authority within three years of the disputed action. Article 3(1)(h) names India's competent authority as the Central Government in the Ministry of Finance (Department of Revenue), or its authorised representative.

To claim treaty benefits, a Mauritius resident must hold a Tax Residency Certificate (TRC) — the treaty names the "Commissioner of Income-tax" as Mauritius's competent authority (Article 3(1)(h)), and a TRC is required on the Indian side by section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961), alongside Form 41 (formerly Form 10F) and the payer's Forms 145 and 146 (formerly Forms 15CA/15CB): Form 145 is filed before remitting, while the Chartered Accountant's certificate on Form 146 is needed only for Part C of Form 145 — a taxable remittance above INR 5 lakh made without a section 395 certificate.

How to Claim Treaty Benefits: A Worked Example

Suppose an Indian company pays a dividend of INR 1,00,00,000 to its Mauritius-resident parent, holding 40% directly. Since the holding exceeds 10%, Article 10(2)(a) caps withholding at 5%: TDS of INR 5,00,000, net remittance INR 95,00,000 — against a hypothetical INR 20,00,000 domestic-rate deduction (20% under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961)) had no TRC and Form 41 been filed. To secure the treaty rate: the parent obtains a TRC and files Form 41 confirming its status and no Indian PE; the payer verifies the shareholding to select the correct Article 10(2) tier and files Form 145 before remitting (Form 146 is needed only for a Part C remittance, a taxable payment above INR 5 lakh without an Assessing Officer's certificate); and where the rate is uncertain, the Mauritius recipient may apply under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961) for a lower-deduction certificate, while the Indian payer's own route is section 395(2) of the Income-tax Act, 2025 (section 195(2) of the Income-tax Act, 1961).

Common Mistakes

The most frequent error is applying a 10% royalty rate by analogy with other Indian treaties — Article 12(2) caps royalties at 15%, not 10%. A second treats the pre-2017 bank-interest exemption in Article 11(3A) as live for any bank loan: it applies only to debt-claims existing on or before 31 March 2017. A third assumes the Limitation of Benefits article screens every capital-gains claim: Article 27A applies only to the expired Article 13(3B) rate, not the Article 13(3A) rule or the 13(4) grandfathering. A fourth assumes MLI modification — wrong, since Mauritius never listed India. Surcharge and cess do not apply on treaty rates, and the Equalisation Levy is abolished.

Frequently Asked Questions

What is the India-Mauritius DTAA?

The India-Mauritius DTAA is a bilateral tax treaty, signed on 24 August 1982 and in force since 6 December 1983, that prevents the same income from being taxed twice. It covers dividends, interest, royalties, fees for technical services, business profits, capital gains and employment income, and was substantially reworked by a 2016 Protocol effective 1 April 2017.

What is the withholding tax rate on dividends under the India-Mauritius DTAA?

Article 10(2) caps dividends at 5% of the gross amount where the beneficial owner is a company holding at least 10% of the paying company's capital directly, and at 15% in all other cases - both well below India's 20% domestic rate. There is no exemption tier; every dividend is taxed at one of these two rates.

What is the royalty rate under the India-Mauritius DTAA?

Royalties are capped at a flat 15% of the gross amount under Article 12(2) - higher than the 10% rate in many comparable Indian treaties, and with no beneficial-owner condition or reduced tier. Fees for technical services are taxed separately, under Article 12A, at 10%, but that article has applied only since 1 April 2017.

Does the MLI apply to the India-Mauritius DTAA?

No. Although both countries are parties to the MLI and India listed Mauritius as a Covered Tax Agreement, Mauritius did not list India in either its signature-stage or definitive MLI position. A treaty is modified only when both sides notify it, so the India-Mauritius DTAA is not a Covered Tax Agreement and the MLI's Principal Purpose Test does not apply.

How are capital gains on shares taxed under the treaty?

Shares acquired on or after 1 April 2017 fall under Article 13(3A): India may tax the gain at domestic rates, without any land-rich test or shareholding threshold. Shares acquired before that date fall into the residual Article 13(4) and remain taxable only in Mauritius, indefinitely. The 50%-of-domestic-rate transition relief in Article 13(3B) applied only to gains arising between 1 April 2017 and 31 March 2019 and no longer applies.

What documents are needed to claim DTAA benefits in India?

A Mauritius resident needs a Tax Residency Certificate from the Mauritius tax authority and must electronically file Form 41 (formerly Form 10F) declaring residency status and confirming no Indian PE. The Indian payer must file Form 145 before remitting; Form 146, the Chartered Accountant's certificate, is needed only for Part C - a taxable remittance above INR 5 lakh without an Assessing Officer's certificate.