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India notified the Protocol amending the India-Sri Lanka DTAA on 16 July 2026
It introduces the Principal Purpose Test (PPT), an anti-abuse rule for treaty benefits
Original treaty: 2013; amending Protocol signed December 2024, in force since 19 June 2026
Amendments apply to income in India from FY beginning 1 April 2027
A tax-treaty anti-abuse standard under which treaty benefits (like reduced tax rates) can be denied if obtaining that benefit was one of the principal purposes of an arrangement or transaction — unless granting it is consistent with the treaty's object and purpose.
Simple Analogy: It's like a bouncer checking not just your ID (the paperwork) but why you're really at the door — if the sole reason you routed a deal through a particular country was to dodge tax, the benefit gets refused.
GS Paper III > Indian Economy > Taxation
Economic & Financial Awareness > Taxation
Double Taxation Avoidance Agreement — a bilateral treaty preventing the same income from being taxed twice
Routing income through an intermediary jurisdiction mainly to secure tax benefits
Base Erosion and Profit Shifting — the OECD framework against tax-avoidance strategies exploiting treaty gaps