Principal Purpose Test:
The Central Board of Direct Taxes (CBDT) has introduced new guidelines for applying the Principal Purpose Test (PPT) under India’s Double Tax Avoidance Agreements (DTAAs), aiming to prevent tax avoidance.These guidelines apply prospectively, with specific exemptions for treaties with Cyprus, Mauritius, and Singapore due to grandfathering provisions.The PPT provisions will apply prospectively, meaning past investments, particularly those before 1st April 2017, will remain unaffected and not face retrospective scrutiny. The PPT is part of international tax rules aimed at preventing misuse of tax treaties.
