Ministry of Finance (MoF) tightens India-Sri Lanka tax treaty with anti-abuse rule

Exam-focused facts from the 24 July 2026 current affairs briefing.

Key facts

The Ministry of Finance (MoF) notified the Protocol amending the India-Sri Lanka Double Taxation Avoidance Agreement (DTAA) to include a Principal Purpose Test (PPT).
The PPT allows authorities to deny treaty benefits if obtaining them was one of the principal purposes of an arrangement or transaction.
The amendment entered into force on June 19, 2026, after completion of legal procedures by both countries.
The anti-abuse rule will apply to income arising from financial year 2027-28 onwards in India.
The amendment does not revise tax rates or create new taxes; it adds an anti-avoidance layer aligned with international efforts to curb base erosion and profit shifting.