The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius has been in place for several years now. It has been an important factor in facilitating trade and investment between the two countries. The agreement aims to eliminate the double taxation of income that can occur when a resident of one country earns income from another country.

The agreement has been instrumental in attracting foreign investment in India. Mauritius has been one of the largest investors in India, accounting for a significant portion of foreign direct investment (FDI) inflows. In fact, more than one-third of the FDI inflows in India come from Mauritius.

Under the DTAA, capital gains tax on the sale of shares of an Indian company by a Mauritius resident is exempt from taxation in India. This has been a significant incentive for foreign investors, as it has made it easier for them to invest in Indian companies without worrying about paying a large amount of tax.

There have been some concerns raised in recent years about the use of the DTAA for round-tripping of funds. Round-tripping is a practice where Indian residents invest in Mauritius, which in turn invests in India to take advantage of the tax benefits offered by the DTAA. The Indian government has taken steps to address this issue by amending the agreement to include a provision that allows India to tax capital gains on the sale of shares in an Indian company by a Mauritius resident if the Mauritius resident does not have a substantial business presence in Mauritius.

Another issue that has been raised is the possibility of abuse of the DTAA by shell companies that are set up solely for the purpose of taking advantage of the tax benefits offered by the agreement. The Indian government has taken steps to address this issue by tightening the rules for the issuance of a Certificate of Residence (COR) by Mauritian authorities. A COR is required for a Mauritius resident to claim the tax benefits offered by the DTAA.

In conclusion, the double taxation agreement between India and Mauritius has been instrumental in facilitating trade and investment between the two countries. While there have been some concerns raised about the use of the DTAA for round-tripping of funds and abuse by shell companies, the Indian government has taken steps to address these issues. The agreement continues to be an important factor in attracting foreign investment in India.