New Delhi: The Union Cabinet on Wednesday approved the signing and ratification of the protocol to amend the agreement between India and Sri Lanka to prevent double taxation and to prevent financial evasion in relation to taxes on income. According to the government release, the Double Taxation Avoidance Treaty (DTAA) has made a general anti-abuse provision.
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This will help in curbing the tax planning tips that exploit the loopholes and inconsistencies in the tax rules. It is noteworthy that the current DTAA was signed between India and Sri Lanka on 22 January 2013 and the treaty came into force on 22 October 2013. India and Sri Lanka are members of the Inclusive Framework, hence they are required to implement the minimum standards under the G-20 OECD BEPS Action Report regarding their DTAA with the Inclusive Framework countries.
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It states that the minimum standards can be met under BEPS Action 6 through a multilateral agreement to implement measures related to tax treaties through Aadhaar Tax Evasion Prevention and Transfer of Benefits (MLI) or bilateral contracts. India is a signatory to the MLI. Sri Lanka is yet to sign the MLI.
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