Abuse of tax treaties, including treaty-shopping, has emerged as a global concern which reflected in the OECD\u2019s Base Erosion and Profit Shifting (BEPS) Action Plan 6 on preventing the granting of treaty benefits in inappropriate circumstances. India-Mauritius Treaty was a classic example of treaty abuse. The protocol signed between India and Mauritius on May 10, 2016, amending the DTAA brought closure to the complicated renegotiation attempts of the Indian Government which started as far back as 1996. Balancing the move with fairness, the changes have been proposed to be implemented prospectively and that too in a phased manner, giving a breather to those currently invested in India and also a heads-up to those planning to invest in India\u2019s growth story in future. With a major part of FDI coming through Mauritius, it was expected that this move will certainly shake market sentiment and we may witness a sudden but temporary downfall in the FDI routed through Mauritius, but owing to the fact that the amendments shall impact the investment made after April 1, 2017, the bourses have held their own. Let us understand how these changes will impact various stakeholders: Not only Mauritius but investment through Singapore shall also be impacted - India-Singapore provides that any gains arising to Singapore residents from the alienation of shares of an Indian Company shall only remain in force so long as the analogous provisions under the India-Mauritius DTAA continue to provide the benefit. Now that these provisions under the India-Mauritius DTAA have been amended, the benefits under India- Singapore DTAA will also be affected. India is also in talks with Singapore to sign a protocol amending the treaty. Derivatives left out - Mauritius treaty as it stands today has given the taxing rights to India only in respect of capital gain arising on shares. But what about other securities, such as Derivatives, which have been left out of the protocol implying that they still cannot be taxed in India under the beneficial provisions of the treaty. Only further action of Indian Government will throw light on whether they have been left out intentionally or not, till then India does not have a right to tax gain arising to FPIs on alienation of derivatives or other securities. Also, investments that are made through hybrid instruments such as compulsory convertible debentures may still be eligible to claim residence-based taxation as the protocol only refers taxation rights in respect of alienation of shares. This may lead to a change in the investment structure from Mauritius. However, as we have witnessed in the recent past, CBDT has been prompt in bringing clarity on debatable issues by releasing a notification\/circular, they may come up with a clarificatory circular in this regard, but again a DTAA cannot be amended unilaterally, by way of a circular. Participatory notes (P-Notes) may lose all its zing - P-Notes are offshore instruments to trade on Indian stocks and are held by investors who want to bet on India without the hassles of setting up vehicle in Mauritius. P-notes which are issued by foreign institutions registered with SEBI, shall face the impact of short-term capital gain tax cost to be borne by the foreign institution, which would have to build in the tax cost into such arrangements. However, considering that popularity of P-Notes has come down after the easing out of KYC norms and introduction of FPI Regulations 2014, which led to an increasing number of foreign investors registering with SEBI to invest directly instead of through P-Notes route, the market is expected to take the change in stride. But at the same time considering the change in tax regime, P-Notes routed through Mauritius and Singapore may not remain a very attractive mode of investment in Indian market. Recently on May 9, 2016, another PIL was filed on the P-Notes. Faceless companies existing merely as a brass-plate not eligible to claim treaty benefits - India-Mauritius Treaty now has a Limitation of Benefits (LOB) clause which provides for a monetary test for determination of whether or not the Mauritius entity is eligible for the benefits of the treaty. This monetary test provides that unless the Mauritius entity incurs expenditure of Rs 27 lakhs within a 12-month period, it shall be deemed to be a conduit\/shell company ineligible to claim the treaty benefits. Interestingly, the protocol signed with Mauritius highlights three major changes which were not mentioned in the press release issued on May 10 \u2013 Introduction of Service Permanent Establishment (\u2018Service PE\u2019), Fees for Technical Services (\u2018FTS\u2019) clause and amendment to the \u201cOther Income\u201d clause. Now a Service PE clause has been introduced in the treaty, which shall put to rest the tax planning practice followed by foreign entities sending their employees to India through a Mauritius entity, to avoid taxes. With introduction of a Service PE clause, such foreign companies would be liable to tax on their global income attributable to India. Even the foreign companies earning FTS from India used to avoid paying tax in India taking benefit of the beneficial provision of the treaty. An argument was taken that since there in no clause of FTS in the treaty, FTS is not liable to tax in India. Other Income clause in the India-Mauritius treaty which was defined exclusively, stand amended and not any income that doesn\u2019t fall in the specific income categories may be taxed under the \u201cOther Income\u201d clause, meaning thereby that India has sealed its right to tax any and every income arising out of India. The government has plugged all the loopholes in the India-Mauritius treaty and brought Mauritius at par with other treaties countries. Now the foreign investors don\u2019t have any incentive to route their business with India through Mauritius. The author is managing partner, Nangia & Co.