How the Mauritius and Singapore Zero-Tax Routes Died: Grandfathering, the 2024 PPT Amendment, and What It Means for NRIs and Their Funds

A Mauritius-domiciled fund sold its stake in an Indian startup in 2025, produced a valid Tax Residency Certificate, and claimed the gain was exempt under the treaty because the underlying shares predated April 2017. Twenty years ago that would have been the end of the conversation. In January 2026 the Supreme Court told a structurally identical investor, Tiger Global, that the certificate was not conclusive, that the structure lacked commercial substance, and that grandfathering does not put an arrangement beyond the reach of the anti-avoidance code. The single most famous tax shortcut into India, the Mauritius route, is now a museum piece with a few living survivors. This piece is about which survivors are real, why the route died, and what it means for the ordinary NRI whose money sits in funds that once relied on it.

The 30-second answer: The 2016 India-Mauritius protocol (signed 10 May 2016) and the 2016 India-Singapore third protocol (signed 30 December 2016) ended the capital-gains "zero tax" routes by giving India the right to tax gains on shares of Indian companies acquired on or after 1 April 2017. Shares acquired before 1 April 2017 were grandfathered and stay taxable only in the residence state, though the Supreme Court's 15 January 2026 Tiger Global ruling held that grandfathering does not block GAAR and a TRC is not conclusive. The 7 March 2024 India-Mauritius protocol adds a Principal Purpose Test but is not yet notified as of June 2026. The India-UAE treaty still exempts share and mutual-fund gains for genuine individual residents. Treaty shopping is dead; genuine residence-based relief survives.

This guide assumes you already understand how an NRI is taxed on Indian capital gains and how DTAA relief is claimed; if those are new, read the capital gains guide and the DTAA relief guide first. What follows is the part that matters for 2026: the precise mechanics of grandfathering, what the 2024 PPT amendment changes and what it deliberately leaves alone, why the courts have hollowed out the old certainty, and why a Dubai-based individual still has a clean route that a Mauritius shell company no longer does.

What the Mauritius route actually was, and why it was worth so much

For three decades the India-Mauritius treaty contained one sentence that moved billions of dollars. Article 13 allocated the right to tax capital gains on shares of Indian companies only to Mauritius, the residence state. Mauritius, in turn, levied no capital gains tax. The arithmetic was brutal in its simplicity: route a private-equity or portfolio investment into an Indian company through a Mauritius holding entity, sell the shares years later at a large gain, and the Indian tax on that gain was zero. Not reduced. Zero.

This was not a loophole in the sense of an accident. It was the explicit text of a treaty India signed in 1983 to attract foreign capital, and for years India honoured it even as everyone understood that much of the "Mauritian" money was Indian money round-tripping home, or global capital using Mauritius purely as a conduit. Singapore later negotiated the same capital-gains treatment, partly because its treaty was tied to the Mauritius one, and Singapore had the advantage of being a genuine financial centre with real substance. By the mid-2010s, Mauritius and Singapore together accounted for a very large share of foreign direct and portfolio investment into India, far out of proportion to the actual economic weight of either country. That distortion is what eventually killed the route.

The point for an NRI reading this is not nostalgia. It is that the funds you hold, Indian mutual funds, Indian private-equity vehicles, offshore feeder funds marketed to NRIs, were frequently built on top of these structures. When the structure's tax assumption changes, the fund's after-tax return changes, and that flows through to you whether or not you ever heard the word "Mauritius".

The 2016 protocols: source-based taxation, with a line drawn on 1 April 2017

India signed the protocol amending the Mauritius treaty on 10 May 2016 and the third protocol amending the Singapore treaty on 30 December 2016. Both took effect for the financial year beginning 1 April 2017, and both did the same fundamental thing: they shifted the right to tax capital gains on shares of Indian companies from the residence state to the source state, India.

The shift was not a cliff. The protocols built a deliberate three-stage architecture, and the dates are the whole story.

Shares acquired before 1 April 2017 were grandfathered. Gains on those shares, whenever you eventually sell them, remain taxable only in the residence state, Mauritius or Singapore, and therefore still escape Indian tax. This was the promise made to investors who had already committed capital under the old rules.

Shares acquired between 1 April 2017 and 31 March 2019 sat in a transition window. If sold during that same window, the gain was taxed in India at 50% of the domestic rate, a two-year glide path rather than an overnight doubling of the tax bill.

Shares acquired on or after 1 April 2017 and sold from 1 April 2019 onwards are taxed in India at the full domestic rate, exactly as if the treaty's capital-gains article on shares had simply been deleted.

For Singapore there was an extra gate that Mauritius did not originally have in the same form: a Limitation of Benefits (LOB) condition. To claim even the transitional 50% relief, a Singapore entity had to clear a substance test, and the treaty spelled out a hard number: the entity's annual operating expenditure in Singapore had to be at least S$200,000 over the preceding 24 months. A shell with a nameplate and a registered agent did not qualify. The grandfathering and the LOB together were India's way of saying: we will honour old genuine money, but the era of pure conduits is over.

The practical effect from 1 April 2019 was that, for any new investment, the Mauritius and Singapore routes offered no capital-gains advantage over investing directly. The reason to use Mauritius or Singapore became regulatory familiarity and fund-administration convenience, not tax. That is a profound change for an industry that had been built substantially on the tax.

The cut-off date is doing enormous work, so be precise about it

The line that matters is the date of acquisition of the shares, not the date of the treaty, not the date you bought into a fund, and not the date the fund itself was set up. A Mauritius fund formed in 2010 that buys shares of an Indian company in June 2018 holds non-grandfathered shares; the gain on those is fully taxable in India. The same fund's pre-April-2017 holdings remain grandfathered. A single fund can therefore hold two pools of shares with completely different tax outcomes, and a competent fund administrator tracks them as separate tax lots.

Put real numbers on the gap. Suppose a Mauritius-resident fund holds shares of an Indian company that it bought in two tranches, one in January 2016 and one in January 2018, and sells the whole position in 2026 for a long-term gain of Rs 10 crore on each tranche.

The 2016 tranche is grandfathered. Under the treaty as it stood at acquisition, the gain is taxable only in Mauritius, which charges nothing, so the Indian tax is zero.

The 2018 tranche is not grandfathered. The gain is taxable in India at the domestic long-term rate for listed shares, 12.5% plus surcharge and cess, so roughly Rs 1.25 crore of Indian tax before surcharge, around Rs 1.43 crore after a 15% surcharge cap and 4% cess.

Two identical Rs 10 crore gains, on shares of the same company, held by the same fund, separated only by a 24-month difference in purchase date, and one bears about Rs 1.43 crore of Indian tax while the other bears none. That single discontinuity is why grandfathering became the most litigated phrase in Indian international tax, and why the precise acquisition date of every tranche became a number worth fighting over.

The 2024 amendment: the Principal Purpose Test arrives, but has not yet landed

On 7 March 2024 India and Mauritius signed a further protocol, this one aligned with the OECD's Base Erosion and Profit Shifting (BEPS) minimum standards. It does two things. It rewrites the treaty's preamble to state explicitly that the treaty is not intended to create opportunities for non-taxation or reduced taxation through treaty shopping. And it inserts a Principal Purpose Test (PPT): a treaty benefit is denied if obtaining that benefit was one of the principal purposes of an arrangement or transaction, unless granting it would accord with the object and purpose of the relevant treaty provisions.

The PPT is far broader and more subjective than the old LOB. The LOB asked a mechanical question with a number attached: did you spend S$200,000, do you have substance. The PPT asks a question of intent: was tax a principal reason you built this the way you did. It hands the tax authority a general-purpose tool to look through structures rather than tick boxes.

Here is the critical fact for anyone planning around this in 2026: the 2024 protocol is not yet in force. A protocol amending an Indian treaty has to be notified under Section 90 of the Income Tax Act, and as of June 2026 the Mauritius PPT protocol has not been notified. Both countries must complete their domestic ratification procedures and exchange notifications, and the protocol then enters into force on the date of the later notification. Until that happens, the PPT in the Mauritius treaty has no legal effect, and the Income Tax Appellate Tribunal has already said as much in pending matters. So the honest position today is that the PPT is signed, looming, and prospective, but not operative.

When it does take effect, two boundaries are already drawn by CBDT Circular No. 1 of 2025, issued on 21 January 2025. First, the PPT applies prospectively, from the date the protocol enters into force, not retrospectively to past transactions. Second, and importantly for legacy investors, the Circular confirms that the PPT does not override the specific bilateral grandfathering commitments for shares acquired before 1 April 2017 in the Mauritius, Singapore and Cyprus treaties. Those grandfathered shares sit outside the PPT's reach. The Circular was deliberate reassurance, because the 2024 signing had spooked the market into wondering whether the PPT might be used to unwind even pre-2017 positions.

The courts moved faster than the treaties, and they moved harder

The treaty amendments set the rules going forward. The courts, meanwhile, have been busy demolishing the assumption that grandfathering plus a Tax Residency Certificate equals automatic safety, and they have done it for transactions that long predate the PPT.

The landmark is Tiger Global, decided by the Supreme Court on 15 January 2026. Tiger Global had invested in Flipkart through Mauritius entities and exited via the Walmart acquisition, claiming the gain was grandfathered because the underlying investment predated April 2017. The Court reached several conclusions that, taken together, reset the playing field. It held that a TRC is necessary but not conclusive: producing the certificate gets you to the starting line, but if the surrounding facts show the entity lacks genuine commercial and economic substance, the treaty benefit can still be denied. It held that GAAR can apply even to grandfathered investments, because GAAR bites on the tax benefit, and if that benefit crystallises after 1 April 2017 and crosses the threshold, the fact that the investment was made earlier does not immunise it. And it held that the grandfathering and LOB provisions in the relevant article apply to direct transfers of Indian shares, not to indirect transfers of an offshore holding entity, which is how the Flipkart exit was actually structured.

Read those three findings together and you see the new reality. Grandfathering is no longer a magic word. It protects a genuine, directly held, pre-2017 share position held by an entity with real substance. It does not protect a conduit, it does not survive a structure built mainly for tax, and it does not stretch to indirect transfers dressed up to look like grandfathered direct ones. The Supreme Court effectively merged the treaty's textual protections with the substance-over-form principle and the anti-avoidance code, and the merger leaves very little room for the old aggressive planning.

For the ordinary NRI this litigation is not a spectator sport. If you hold an offshore feeder fund or a private-equity vehicle that has been claiming treaty exemption on Indian exits, the after-tax return you were quoted may rest on positions that the Supreme Court has just narrowed. It is a fair question to put to your fund: how much of our Indian capital-gains position relies on grandfathering, and how much of that would survive a substance challenge.

The UAE treaty is the live counterexample, and it works for the right reason

Set against all of this, the India-UAE treaty is the route that still functions, and understanding why it still functions tells you exactly what died and what survived.

Article 13 of the India-UAE treaty allocates the right to tax gains on shares (other than shares of companies whose value comes mainly from Indian immovable property) to the residence state. The UAE has no personal capital gains tax. So a genuine UAE-resident individual selling Indian listed shares can face zero Indian tax on the gain, the same outcome Mauritius once offered. The Delhi ITAT went further in 2024: in Saket Kanoi and similar rulings, it held that gains on Indian mutual fund units are also covered, because units are not technically "shares" and therefore fall under the residual clause Article 13(5), which assigns taxing rights only to the residence state. That extended the zero-tax outcome from shares to mutual funds for UAE residents, a meaningful win given how many NRIs hold Indian equity through funds rather than direct stocks.

Why has this survived when Mauritius did not? Two reasons, and both are instructive. First, the UAE treaty's capital-gains article was not amended the way Mauritius and Singapore were; India never shifted share-gains taxation to source under the UAE treaty. Second, and more importantly, the typical beneficiary is a real individual living in Dubai, not a shell company. The substance question that destroyed the Mauritius conduits, where is your office, who are your directors, what do you actually do, has an easy answer for a person who genuinely lives and works in the UAE. The treaty's own limitation-of-benefits article denies relief to an entity created mainly to obtain treaty benefits, but it does not threaten a bona fide resident individual.

Put a real situation on it. Arjun, an Indian national, has lived and worked in Dubai since 2021, spends more than 183 days a year physically in the UAE, and holds a UAE Tax Residency Certificate. In 2026 he sells Indian equity mutual funds with a long-term gain of Rs 50,00,000.

If he relied only on domestic Indian law, the gain above Rs 1.25 lakh would be taxed at 12.5%, roughly Rs 6,09,375 plus cess. By invoking Article 13 of the India-UAE treaty, with his TRC and Form 10F filed, he claims the gain is taxable only in the UAE, which charges nothing, so his Indian tax is zero. The difference is the entire Rs 6 lakh-plus. Crucially, this is not treaty shopping. Arjun is not a paper entity routing someone else's money; he is a real person who actually lives there. That is the distinction the law now draws, and it is the distinction that matters.

The contrast with the West is just as sharp. Had Arjun been resident in the US, UK or Canada, those treaties do not give residence-only taxation on Indian share gains, so he would pay the Indian rate and claim a foreign tax credit at home. The Gulf advantage is specific to the Gulf, and it rests on genuine residence, not on a clever holding company.

Why treaty shopping died, in one sentence

Strip away the dates and the case names and the death of treaty shopping comes down to a single shift in what the law rewards. The old system rewarded where your money was domiciled: park a company in Mauritius, claim the treaty, done. The new system rewards where economic substance actually is: real residence, real operations, real decision-making. The 2016 protocols moved the taxing right to source for new investments. The PPT and GAAR gave the authorities a tool to look through structures that exist only on paper. The Supreme Court confirmed that a certificate cannot manufacture substance that is not there. What remains legitimate is residence-based relief claimed by people and entities who genuinely belong in the residence state. What died is the conduit. For an individual NRI, that is reassuring rather than threatening: the routes built for shell companies are gone, but the relief built for real residents, the UAE treaty above all, is intact and has actually been strengthened by the courts confirming its logic.

What this means for the funds you actually hold

The reader of this site rarely owns a Mauritius company directly. The exposure is indirect, through funds, and that is where the attention should go.

If you hold an Indian mutual fund, the fund itself is an Indian resident and does not rely on Mauritius treaty benefits; your tax is governed by your own residency and your own treaty, which is why the UAE rulings above matter and the Mauritius drama largely does not. If you hold an offshore feeder or India-focused PE/VC vehicle marketed to NRIs, the picture is different: that vehicle may sit in Mauritius, Singapore or elsewhere, and its after-tax returns can depend on grandfathering and substance positions that have just been narrowed. The right questions to ask the fund are concrete: what proportion of the portfolio is pre-April-2017 directly held shares, what is the substance position of the holding entity, and how is the fund modelling Indian capital-gains tax on exits in its return projections now versus five years ago.

Edge cases

Cyprus rides along with Mauritius and Singapore. The same 1 April 2017 grandfathering cut-off and the same CBDT Circular protection apply to the India-Cyprus treaty, which was renegotiated in 2016. If you encounter a Cyprus-routed structure, treat it as analytically identical to Mauritius for grandfathering purposes.

Indirect transfers are a separate trap. Tiger Global turned partly on the gain arising from the transfer of an offshore holding company rather than the Indian shares directly. India's indirect-transfer rules under Section 9(1)(i) can tax gains on offshore shares that derive their value substantially from Indian assets, and the treaty grandfathering may not reach those at all. A structure that looks grandfathered on the Indian-share layer can be exposed one layer up.

The PPT, once notified, is not retrospective but it is forward-looking on old assets. CBDT Circular No. 1 of 2025 protects pre-2017 grandfathered shares from the PPT and confirms prospective application. But for non-grandfathered assets, once the protocol is notified, the PPT will apply to gains arising after that date even on investments made before it. The relevant question becomes when the benefit arises, not only when the asset was bought.

The UAE 183-day rule is a hard floor, and it is debated at the margins. The treaty requires an individual to be present in the UAE for at least 183 days in the relevant period to be treated as a UAE resident for treaty purposes. Commentators, including market voices, have flagged that a 183-day UAE stay timed purely to capture a single large gain sits uncomfortably close to the line the courts are now drawing on substance. The conservative reading is that genuine, settled UAE residence is safe and that a one-off 183-day visit engineered around a sale is exactly the kind of arrangement a PPT or GAAR analysis is built to catch. This is genuinely unsettled, so do not treat a single tax year of presence as a guaranteed shield.

The closing read

The honest read is that the Mauritius and Singapore "zero tax" era is over for anything you buy today, and that this is settled law rather than a debate. The 2016 protocols moved share-gains taxation to source from 1 April 2017; the grandfathering for older shares survives on paper but has been hollowed out by the Supreme Court's Tiger Global ruling, which confirmed that a TRC is not conclusive, that GAAR reaches grandfathered structures, and that indirect transfers are not protected. The 2024 PPT amendment is signed and prospective but not yet notified as of June 2026, and when it lands it will not disturb genuine pre-2017 holdings.

For the NRI deciding what to do, the recommendation is straightforward. Do not build anything new around Mauritius or Singapore for the tax; the advantage is gone and the litigation risk is real. If you are a Gulf resident, the India-UAE treaty is the live, legitimate route, and it now covers mutual fund units as well as shares, so get a genuine UAE Tax Residency Certificate, file Form 10F, and make sure your residence is real, 183-plus days and an actual life there, not a timed visit. If you are a Western-treaty resident, expect to pay the Indian rate and plan around the foreign tax credit instead. And if you hold an offshore fund that still relies on grandfathering, ask it the substance questions directly, because the certainty those structures sold you no longer exists. The exception worth flagging is anyone sitting on a large, genuinely pre-2017, directly held position: that relief is real, but the moment a structure looks engineered, assume it will be challenged. On anything of size, this is the point to pay an international tax specialist, not to rely on a blog, this one included.

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This guide is educational and general in nature. It is not individual tax or investment advice. Treaty outcomes depend on your exact residency, the acquisition dates of your holdings, the substance of any structure involved, and rules that are actively litigated and changing, including the not-yet-notified 2024 Mauritius protocol. Confirm your specific position with a qualified chartered accountant or international tax specialist before relying on any treaty position.