India Tax Department Won’t Test Past Investments on Treaty Abuse

India’s tax department won’t subject past investments to a test for treaty tax abuse, providing relief to foreign investors.

India’s Central Board of Direct taxes elaborated on its position on the “principal purpose test,” part of the multilateral convention on tax treaty provisions to prevent base erosion and profit shifting, put together by the Organization for Economic Cooperation and Development. The treaty came into force in India in 2019.

The test aims to deny treaty benefits to entities that authorities believe have been set up primarily for the purpose of obtaining tax treaty benefits. It is included in most of India’s ...