Investing into India through Mauritius or Singapore in October 2026: the treaty tests, the GAAR and Tiger Global

Under the India-Mauritius and India-Singapore double taxation avoidance agreements (DTAAs) as amended in 2016, gains on Indian shares acquired on or after 1 April 2017 may be taxed in India, while shares acquired before that date stay taxable only in the investor's State of residence, subject in Singapore to a limitation of benefits clause. The 50 per cent concession for the transition period ended on 31 March 2019. Two further tests sit over both treaties: the General Anti-Avoidance Rule (GAAR) in Chapter XI of the Income-tax Act, 2025, which Section 159(6) applies even where it is not beneficial to the assessee, and a principal purpose test in a 2024 protocol to the Mauritius treaty, whose notification and entry into force we have not confirmed from an official source. The Supreme Court's judgment of 15 January 2026 in Tiger Global holds that a tax residency certificate does not by itself settle the question.

What did the 2016 protocols change?

Both protocols replaced residence-only taxation of share gains with a split by acquisition date. The India-Mauritius protocol was signed on 10 May 2016 and entered into force on 19 July 2016, according to the Ministry of External Affairs treaty database. Its Article 4 amended Article 13 of the Convention with effect from 1 April 2017. New paragraph 3A says gains from shares "acquired on or after 1st April 2017" in a company resident in a Contracting State "may be taxed in that State". Paragraph 3B capped the rate on gains arising from 1 April 2017 to 31 March 2019 at 50 per cent of the rate in the company's State. The residuary paragraph 4 leaves other gains taxable only in the alienator's State of residence, and that is where earlier shares sit.

The India-Singapore Third Protocol, signed on 30 December 2016, is more explicit. The consolidated agreement published by the Inland Revenue Authority of Singapore (IRAS) records that it entered into force on 27 February 2017, with its Articles 2 to 4 taking effect from 1 April 2017. Article 13(4A) makes gains on shares acquired before 1 April 2017 "taxable only in the Contracting State in which the alienator is a resident". Paragraph 4B lets the company's State tax gains on shares acquired on or after that date, and paragraph 4C capped the rate at 50 per cent for gains arising from 1 April 2017 to 31 March 2019.

When did the transition end, and what is grandfathered?

The 50 per cent window in both treaties closed on 31 March 2019, so a share acquired from 1 April 2017 and sold today meets Indian tax at the full domestic rate. Shares acquired before 1 April 2017 remain outside Indian taxation under Mauritius paragraph 4 and Singapore paragraph 4A, and in Singapore that protection is conditional, as the next section shows.

How does the limitation of benefits clause work?

The two clauses differ in reach. Article 27A of the Mauritius Convention, added by Article 8 of the protocol, denies the benefits of "Article 13(3B)" to a resident whose affairs were arranged with the primary purpose of taking advantage of them, and to a shell or conduit company. A company is deemed one if its expenditure on operations in the State in the 12 months before the gain is less than Mauritian Rs. 1,500,000 or Indian Rs. 2,700,000, as the case may be. It is deemed not to be one if it is listed on a recognised stock exchange of that State or meets the expenditure figure. Because the clause is tied to paragraph 3B, it never reached the grandfathered shares under paragraph 4.

Singapore's Article 24A, added by Article 3 of the Third Protocol, reaches both the transition paragraph 4C and the grandfathered paragraph 4A. A resident is deemed a shell or conduit company if its annual expenditure on operations in its State is less than S$200,000 in Singapore or INR 5,000,000 in India, for paragraph 4A in each of the 12-month periods in the 24 months before the gains arise. Listing on the Singapore Exchange, or on a SEBI-recognised exchange for India, takes a company outside the deeming rule, as does meeting the spending figure.

What did the 2024 protocol add to the Mauritius treaty?

A protocol to the Mauritius Convention signed in 2024 adds a principal purpose test (PPT) as a new Article 27B, according to secondary reports. We have not seen its notification in the Gazette of India or an official record of its entry into force, so this note gives no date for either.

For Singapore, the Multilateral Instrument (MLI) route has already operated. IRAS's Annex A to the consolidated agreement shows a new Article 29A with the same principal purpose wording, effective in Singapore for taxes withheld at source from 1 January 2020 and for other taxes from basis periods beginning on or after 1 April 2020. We have not read the dates on India's side.

What do the residency certificate and Form 10F do?

Section 159(8) of the Income-tax Act, 2025 lets a non-resident claim treaty relief only when a certificate of residence is obtained "from the Government of that country" and "such other documents and information, as may be prescribed" are provided. The Supreme Court read the equivalent provision of the earlier Act as an eligibility condition only. The Income-tax Rules, 2026 were not read for this note.

How does the GAAR apply, and where is it?

Chapter XI of the Income-tax Act, 2025, titled "General Anti-Avoidance Rule", carries it in sections 178 to 184. Section 179 defines an impermissible avoidance arrangement as one whose main purpose is to obtain a tax benefit and which meets any of four tests: unusual rights between arm's length parties, misuse of the Act, lack of commercial substance, or means not ordinarily used for bona fide purposes. Section 180 deems commercial substance absent where an arrangement involves round trip financing or an accommodating party, or locates an asset or residence "without any substantial commercial purpose" other than a tax benefit. Section 181 lets the consequences include denying "a benefit under a tax treaty", treating a party's residence as being elsewhere, and looking through a corporate structure. Section 159(6) applies Chapter XI to the assessee "even if such provisions are not beneficial to him". Section 274 sends a case through the Principal Commissioner and an Approving Panel, and section 183 leaves guidelines and conditions to be prescribed.

What did Tiger Global decide?

In The Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings (Civil Appeals 262 to 264 of 2026, 2026 INSC 60), decided on 15 January 2026 by R. Mahadevan and J.B. Pardiwala, JJ., the Court allowed the appeals and set aside the Delhi High Court's judgment of 28 August 2024. It upheld the Authority for Advance Rulings' rejection of the Mauritius applicants' applications under proviso (iii) to section 245R(2) of the 1961 Act, as relating to a transaction prima facie for tax avoidance. The Court held that a tax residency certificate is an eligibility condition and is not binding on the authority, which may reach its own conclusion on residence, and that treaty relief for the sale of shares after 1 April 2017 could be tested under the general anti-avoidance provisions of the 1961 Act. It also observed that the limitation of benefits clause could be applied only to paragraph 3B of Article 13. Reading Rule 10U(2) of the Income-tax Rules, 1962, it treated the pre-2017 cut-off as diluted where a tax benefit is obtained after 1 April 2017 through an arrangement.

The result is narrow: it concerns the threshold bar in section 245R(2) and a prima facie view.

What does it mean for a fund that sold in both years?

An illustration. The fund, its holdings and the numbers below are hypothetical. A Singapore-resident fund sells, in one tax year, two parcels of unlisted shares in an Indian company, each with a long-term gain of INR 100 crore. It bought one parcel in 2015 and the other in 2020. The domestic rate used is the 12.5 per cent in section 197(1)(b) of the 2025 Act, before surcharge and cess, and we have not checked whether another provision displaces it for this fund.

Parcel bought in 2015 (Article 13(4A))
  Indian tax if the Article 24A spending test is met     nil, taxable in Singapore only
  Indian tax if spending falls short in one 12-month
    period of the prior 24 months                        INR 12.5 crore, benefit lost
  Further exposure if the GAAR is invoked                 outside the treaty arithmetic

Parcel bought in 2020 (Article 13(4B))
  Indian tax at the full domestic rate                    INR 12.5 crore
  Article 24A and the 50 per cent window                  not applicable, as the window closed
                                                          on 31 March 2019

On these assumptions, the 2015 parcel turns on the Singapore spending test and on any GAAR challenge, and the 2020 parcel is taxable in India whatever the test result. For a Mauritius fund the same 2015 parcel falls outside Article 27A, because that clause is tied to paragraph 3B, and the contest would move to the GAAR and to the principal purpose test if it applies.

What remains unsettled?

Whether the principal purpose test in the Mauritius treaty, once in force, can be applied to a pre-2017 parcel that was not part of the 2016 arrangement.

How the GAAR and the grandfathering rule in the Income-tax Rules, 2026 operate together after Tiger Global, which this note did not read the rules to settle.

Whether the reasoning carries beyond section 245R(2) to a final assessment.

What the rules now prescribe under section 159(8), and what a Singapore residence certificate must show about management and control.

How India applies the Multilateral Instrument to the Singapore treaty from the Indian side, which we have not confirmed.