Withholding Tax Rates: India to Mauritius Under DTAA

India to Mauritius Withholding Tax Rates Under DTAA

When an Indian entity pays a Mauritius resident — for dividends, interest, royalties, or fees for technical services — tax must be withheld at source under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961). The India-Mauritius DTAA, in force since 6 December 1983 and substantially amended by a 2016 Protocol effective 1 April 2017, provides reduced rates that are usually far more favourable than the 20% domestic rate — with one notable exception: the treaty's royalty cap of 15% is higher than the 10% seen in several of India's other treaties.

Under section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961), the taxpayer may apply whichever rate — domestic or treaty — is more beneficial. This page sets out each withholding category, article by article, including the exemption limbs the treaty attaches to interest.

Dividend Withholding Rates

Article 10 of the India-Mauritius DTAA sets two tiers.

The 10% direct-holding threshold for the reduced 5% tier is unusually generous — several of India's treaties require a 25% holding for a comparable rate. There is no 0% tier under this treaty: even where a Mauritius company owns the Indian payer outright, at least 5% must be withheld.

Article 10(3) is sometimes confused with an Indian withholding rule. It is not: it permits Mauritius to tax dividends paid by a Mauritius-resident company, where those dividends are deductible in computing the payer's profits, capped at the Mauritius corporate tax rate. It has no bearing on withholding by an Indian payer and should never be read into an India-source dividend calculation.

Interest Withholding Rates

Article 11 caps interest arising in India and beneficially owned by a Mauritius resident at 7.5% — but only since the 2016 Protocol's amendment took effect on 1 April 2017. Before that date, Article 11(2) placed no cap on interest taxation at all.

The bank exemption at Article 11(3A) is the most commonly misapplied item on this treaty. It is a closed, legacy class: it exempts interest only on debt-claims that already existed on or before 31 March 2017. A loan a Mauritius bank advances today, however bona fide, does not qualify — it is taxed at the general 7.5% rate under Article 11(2). None of the interest exemptions in this treaty names a specific institution (no RBI, EXIM Bank, or named-bank list, as appears in some other Indian treaties) — every limb is written by category and applies reciprocally.

Royalty and FTS Withholding Rates

Royalties and fees for technical services sit in two separate articles under this treaty — Article 12 for royalties, and the wholly separate Article 12A (inserted by the 2016 Protocol, effective 1 April 2017) for FTS.

The 15% royalty rate is the single biggest trap on this treaty. Many of India's other treaties cap royalties at 10%, and it is easy to assume Mauritius follows the same pattern — it does not. Article 12(2) reads "the tax so charged shall not exceed 15 per cent of the gross amount of the royalties," with no beneficial-owner qualifier and no equipment-royalty carve-out. Even at 15%, the treaty rate still beats India's 20% domestic rate under section 207(2) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961) once surcharge and cess are added, so the treaty remains worth claiming — but a computation that quotes 10% for a Mauritius royalty is simply wrong.

FTS, by contrast, is capped at 10% under Article 12A(2), the usual treaty-beaten comparator to the section 207(2) (Table, Sl. No. 2) domestic rate. Article 12A(3) defines FTS broadly — "managerial or technical or consultancy services, including the provision of services of technical or other personnel" — with no "make available" requirement, so purely managerial or advisory fees are captured even where no technical knowledge is transferred to the Indian payer. Only payments already covered by Article 14 (independent personal services) or Article 15 (employment) are excluded. Because Article 12A did not exist before 1 April 2017, FTS paid for periods before that date should not be analysed under it — it falls instead to Article 7 (if a PE exists) or the pre-amendment, residence-only Article 22.

Capital Gains Treatment

Article 13 does not set a withholding rate; it allocates taxing rights between the two States.

Immovable property: gains from Indian real estate are taxable in India regardless of the seller's residence (Article 13(1)).

PE assets: gains on movable property forming part of a Mauritius enterprise's Indian PE are taxable in India (Article 13(2)).

Shares: the treatment turns entirely on the acquisition date. Shares acquired on or after 1 April 2017 fall under Article 13(3A) — India may tax the gain, unconditionally, at domestic capital gains rates, with no land-rich test and no minimum shareholding. Shares acquired before 1 April 2017 fall instead into the residual, residence-only Article 13(4) and remain taxable exclusively in Mauritius, permanently — this is the treaty's grandfathering, and it has no sunset date. The transition rate under Article 13(3B), capping tax at 50% of the domestic rate for gains arising between 1 April 2017 and 31 March 2019, has expired and no longer applies to any transaction. Non-share instruments — debentures, units, partnership interests — remain in Article 13(4) regardless of when they were acquired.

Ships and aircraft: gains from vessels or aircraft in international traffic, and related movables, are taxable only where the enterprise's place of effective management is situated (Article 13(3)).

Where Article 13(3A) applies, India's domestic capital gains provisions govern the actual rate — section 196, section 197 or section 198 of the Income-tax Act, 2025 (sections 111A, 112 and 112A of the Income-tax Act, 1961) as applicable to the type of gain — and payers should confirm the current figures before withholding, since this page does not restate them.

How to Apply Reduced Rates

Tax Residency Certificate (TRC)

The Mauritius resident must obtain a Tax Residency Certificate confirming Mauritius tax residence for the relevant period. The treaty's own competent-authority clause (Article 3(1)(h)) names the Commissioner of Income-tax of Mauritius.

Form 41 (formerly Form 10F)

The non-resident must electronically file Form 41, providing status (individual, company, etc.), nationality, tax identification number, period of residence, and a declaration on the existence of a PE in India, under section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961).

Forms 145 and 146 (formerly Forms 15CA and 15CB)

The Indian payer must file Form 145 before remitting. Form 146, a Chartered Accountant's certificate of the applicable rate and treaty eligibility, is required only for Part C of Form 145 — a taxable remittance above INR 5 lakh made without a section 395 certificate — not for every payment.

Lower Withholding Certificate

Where there is doubt about the correct rate, an application may be made under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961) for a certificate from the Assessing Officer specifying the rate to be deducted.

Domestic Rates vs Treaty Rates Comparison

Domestic rates under section 207(1) and section 207(2) of the Income-tax Act, 2025 are further increased by applicable surcharge and health and education cess (4%); the DTAA rates above are final, all-inclusive figures with no surcharge or cess added on top.

Common Mistakes and Compliance Tips

Mistake 1: Quoting a 10% royalty rate

This is the most common and costly error on this treaty. Article 12(2) caps royalties at 15%, not 10%. Under-withholding at 10% exposes the Indian payer to interest and a shortfall demand.

Mistake 2: Treating the bank-interest exemption as live

Article 11(3A) exempts interest only on debt-claims existing on or before 31 March 2017. Any loan or facility entered into after that date is taxed at the general 7.5% rate, not exempt.

Mistake 3: Assuming a general Limitation of Benefits screen

Article 27A applies only to the now-expired transition rate in Article 13(3B). It has no bearing on dividends, interest, royalties, FTS, the ordinary Article 13(3A) source-taxation rule, or the Article 13(4) grandfathering.

Mistake 4: Assuming MLI modification

Both India and Mauritius are MLI parties, but Mauritius did not notify this treaty. It is not a Covered Tax Agreement, and the MLI's Principal Purpose Test does not apply — India's domestic GAAR is the operative anti-abuse check instead. A further Protocol was signed on 7 March 2024, adding a Principal Purpose Test and a revised preamble, but it is not in force.

Mistake 5: Missing the acquisition-date test on share gains

Whether India can tax a share sale depends entirely on whether the shares were acquired before, or on or after, 1 April 2017 — not on the seller's shareholding percentage or the nature of the buyer. Verify the acquisition date before assuming either outcome.

For the full treaty overview, see our comprehensive India-Mauritius DTAA guide.

Frequently Asked Questions

What is the withholding tax rate on dividends from India to Mauritius?

Article 10(2) of the DTAA caps dividends at 5% of the gross amount where the beneficial owner is a company holding at least 10% of the Indian payer's capital directly, and at 15% in all other cases. Both rates are well below India's 20% domestic rate, and there is no 0% tier under this treaty.

Is there an exemption for interest paid to a Mauritius bank?

Only for a closed class of legacy debt. Article 11(3A) exempts interest paid to a Mauritius bank carrying on bona fide banking business, but solely for debt-claims existing on or before 31 March 2017. Interest on any loan advanced after that date is taxed at the general 7.5% rate under Article 11(2), not exempt.

What is the royalty withholding 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% cap in many other Indian treaties, with no beneficial-owner condition or reduced tier. It still beats India's 20% domestic rate under section 207(2) of the Income-tax Act, 2025 once surcharge and cess are added.

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

Fees for technical services are capped at 10% under the separate Article 12A, inserted by the 2016 Protocol and applicable only from 1 April 2017. There is no 'make available' requirement, so managerial, technical and consultancy fees are all covered, including payments for the provision of technical or other personnel.

How are gains on shares in an Indian company taxed?

It depends on the acquisition date. Shares acquired on or after 1 April 2017 are taxable in India under Article 13(3A) at domestic rates, with no threshold or land-rich test. Shares acquired before that date remain taxable only in Mauritius under Article 13(4), permanently, with no sunset date.

Does the MLI's Principal Purpose Test apply to payments to Mauritius?

No. Mauritius did not notify the India-Mauritius DTAA under the MLI, even though India did, and a treaty is modified only when both sides list it. This treaty is therefore not a Covered Tax Agreement, and the MLI's Principal Purpose Test does not apply - India's domestic GAAR remains the applicable anti-abuse rule.