Archive · 19 Jul 2026
India Strengthens Tax Treaty with Sri Lanka
India and Sri Lanka have updated their tax agreement to stop people from using it to avoid taxes.
The new rules say that if someone is trying to get tax benefits just by using the agreement, they won't get those benefits.
This change makes sure that the agreement is only used for real business purposes.
The new rules will start working from April 1, 2027.
The agreement was first made in 2013, and the changes were approved in 2022 and signed in 2024.
Experts say these changes make the agreement follow international rules better.
India and Sri Lanka amended their Double Taxation Avoidance Agreement (DTAA) to plug anti-avoidance loopholes.
The amendment introduces the Principal Purpose Test to ensure tax benefits are not the main reason for transactions.
The changes will be effective from April 1, 2027, and do not alter any tax rates.
The original agreement was signed on January 22, 2013, and the protocol was signed in December 2024.
Experts note that the amendments align the treaty with international norms and OECD Multilateral Instrument mandates.
- Who
- India and Sri Lanka
- What
- Amendment of the Double Taxation Avoidance Agreement (DTAA)
- When
- Amendment effective from April 1, 2027
- Where
- India and Sri Lanka
- Why
- To plug anti-avoidance loopholes and prevent treaty shopping
- Agreement Type
- Double Taxation Avoidance Agreement (DTAA)
- Amendment Date
- June 19, 2024
- Effective Date
- April 1, 2027
- Principal Purpose Test
- Introduced to prevent tax avoidance
- Original Agreement Date
- January 22, 2013
- Cabinet Approval Date
- February 2022
- Signing Date of Protocol
- December 2024
