1. Home
  2. Current Affairs
  3. Current News
  4. New Guidelines on Tax Treaty Benefits

New Guidelines on Tax Treaty Benefits

  • 24 Jan 2025

In January 2025, the Central Board of Direct Taxes (CBDT) introduced fresh norms for applying the Principal Purpose Test (PPT) under Double Tax Avoidance Agreements (DTAAs).

Key Points

  • Principal Purpose Test (PPT) Guidelines: The new PPT provisions will apply prospectively to DTAAs, clarifying tax treaty benefits and preventing treaty abuse.
  • Exclusions for Grandfathering Provisions: DTAAs with Cyprus, Mauritius, and Singapore remain exempt due to existing treaty-specific bilateral commitments.
  • Grandfathering Primacy: Commitments under these treaties are governed by their specific provisions, excluding them from the PPT’s scope.
  • Global Compliance: The guidelines align with the BEPS (Base Erosion and Profit Shifting) Action Plan 6 and the U.N. Model Tax Convention, incorporating international tax principles while respecting India's reservations.
  • Expert Insights: Industry experts highlighted that the guidelines address ambiguity in applying PPT provisions and reaffirm India’s adherence to treaty obligations with specific partners.
  • Implementation Timeline: These changes are expected to come into effect starting the financial year on April 1, 2025.