India: Clarification to guidance that grandfathering provisions in tax treaties are excluded from principal purpose test

Guidance does not affect application of other treaty provisions or anti-abuse rules

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March 17, 2025

The Central Board of Direct Taxes (CBDT) on March 15, 2025, issued a press release clarifying that the circular it issued in January 2025, providing that the grandfathering provisions in Indian income tax treaties are excluded from the scope of the principal purpose test (PPT) (read TaxNewsFlash), is not intended to affect the application of:

  • Any other treaty provisions, including those related to treaty entitlement or the denial of treaty benefit, other than the PPT
  • Anti-abuse provisions under the Income-tax Act, 1961, such as general anti-abuse rule, specific anti-abuse rules, and judicial anti-abuse rules

Read a March 2025 report prepared by the KPMG member firm in India

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