In what may plug a major tax loophole in the double taxation avoidance agreements, the government is planning to introduce some anti-treaty abuse provisions.

This may be done in the form of a limitation of benefit clause in the domestic law. Simply put, it would mean that only genuine investors, who have a significant economic presence in countries with which India has double taxation avoidance agreements would benefit from the treaty.

If the finance ministry agrees to the proposal, it is likely to be placed in the Direct Tax Code, which is set to be introduced in the winter session of Parliament, sources close to the development said.

Such an in-built provision in the domestic law will have over riding powers over the tax treaties and will mean that the government will not have to renegotiate and amend the over 70 such agreements it has at present with other countries.

?It will also set the trend for future treaties and will mean an end to tax evasion through double taxation avoidance agreements,? the source said.

The move will also be in tandem with the main objective of such tax treaties, which is to facilitate genuine investment and not encourage tax avoidance. However in recent times these treaties have become a means of tax evasion by companies, who route their investments to India through ?tax havens? like Mauritius and Cyprus.

?Round tripping? is another cause of worry for the tax authorities, where domestic funds are transferred to Mauritius and then return to India to receive exemption from capital gains tax.