24 Oct 2026Updated 24 October 2026 · By Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
"We have the TRC from Mauritius. Isn't that the end of the matter?" I have heard this for years, often from Gulf-based clients holding Indian investments through a company elsewhere. For a long time the honest answer was "mostly, yes". That changed on 15 January 2026.
A tax residency certificate is still necessary, but it is no longer the end of the matter. After the Supreme Court's judgment in the Tiger Global case, the tax department can look behind the certificate and ask who really runs the company, and why it exists.
What the Supreme Court actually said
Three Tiger Global companies in Mauritius sold shares of a Singapore company in 2018, when Walmart acquired Flipkart. The Singapore company drew its value from Flipkart's Indian business. The Mauritius companies claimed the gain was exempt under the India–Mauritius treaty, relying on their TRCs.
The Court ruled against them on several points. First, a TRC is evidence of residence, not conclusive proof that the holder is entitled to treaty benefits. The department may examine where control is really exercised, whether the entity has commercial substance, and whether the arrangement is a conduit. The older CBDT circulars that treated a TRC as sufficient no longer protect a structure in an abuse case.
Second, the treaty protection relied on for the gain covered direct transfers of shares in Indian companies. A sale of shares in a foreign company that derives its value from India, the indirect transfer, did not get that protection.
Third, the Court held that the General Anti-Avoidance Rule could reach a tax benefit arising on an exit after 1 April 2017, even where the investment itself was made earlier. On the facts, it found the structure prima facie designed to avoid tax.
What has happened since
Two developments matter. On 31 March 2026 the CBDT issued Notifications 54 and 55 of 2026, amending Rule 10U of the old Income-tax Rules, 1962 and the corresponding rule in the Income-tax Rules, 2026. The effect, as most practitioners read it, is to take income from transferring investments made before 1 April 2017 out of GAAR's reach again. So the grandfathering that Tiger Global had narrowed has been largely restored for GAAR purposes.
That helps, but the Court's reasoning on the TRC, on substance over form and on judicial anti-avoidance still stands. GAAR is only one of the department's tools.
The second development is the new law itself. From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act. Treaty relief now sits in section 159 (the old sections 90 and 90A). Section 159(8) says a non-resident can claim treaty relief only if it holds a certificate of residence from the other country and provides the further documents and information prescribed. Those details go in Form 41, which replaces the old Form 10F. Section 159 also states openly that treaties are meant to avoid double taxation without creating opportunities for non-taxation, including through treaty shopping.
On top of this, for treaties covered by the Multilateral Instrument, the principal purpose test applies. If one of the principal purposes of an arrangement was to obtain a treaty benefit, the benefit can be denied unless granting it fits the purpose of the treaty. The India–UAE treaty, for example, now carries this test.
These treaty questions sit alongside FEMA and GST in our cross-border tax and FEMA advisory work.
A story from the desk
Take Faisal (not his real name). He has lived in Dubai since the early 2000s. In 2015, on an adviser's suggestion, he put his stake in a Bengaluru software company into a Mauritius company. The Mauritius company has two local directors supplied by a management firm, a registered address, and a bank account that moves money only when Faisal emails instructions. A buyer has now offered to acquire the Indian company, and Faisal asked me whether his Mauritius TRC covers the gain.
The good news for Faisal is that his shares were acquired before 1 April 2017 and are held directly, and the March 2026 amendment keeps that investment outside GAAR. But the department can still ask whether the Mauritius company is truly the beneficial owner of the shares, or whether it is a shell through which Faisal holds them. Every real decision, from investing in 2015 to negotiating the sale now, has been taken by Faisal in Dubai. The board minutes in Mauritius record decisions already made.
If the department looks through the company, the question becomes how a UAE resident is taxed on Indian shares, and under the India–UAE treaty that gain can be taxed in India. We are now building Faisal's file, the reasons for the 2015 decision and what the Mauritius directors actually did, and being honest with him about where it is thin.
What to check in your own structure
If you hold Indian investments through an entity abroad, these are the questions I would ask today:
- Do the directors in that country actually meet, discuss and decide, or do they sign what is sent to them?
- Does the entity have its own office, staff or outsourced functions that it controls and pays for?
- Does it have a bank account it operates, with money that stays there rather than passing straight through?
- Is there a commercial reason for the entity being where it is, beyond the treaty rate, and is that reason written down at the time?
- Is it the beneficial owner of the income, free to use it, and not bound to pass it on?
- Are the TRC and Form 41 in place for each year in which you claim relief?
People often ask me whether they should now wind up their holding companies. Not necessarily. A company with real people, real decisions and a real reason to be where it is remains perfectly defensible. The ones at risk are structures that exist only on paper.
Others ask whether this only matters for large funds. The principles apply equally to a family holding company in Mauritius, Singapore or the UAE. If you also run a Dubai company from India, the same "where are decisions really made" question appears from the other side, and I have written about it in running a Dubai company from India.
If you want to test your own structure against this, write to us at letstalk@rtaandassociates.com.
For how this fits with FEMA, treaties and GST more broadly, see our guide to cross-border tax and FEMA advisory.
Related guides
- Cross-border tax and FEMA advisory: the full guide
- Running a Dubai company from India: place of effective management and UAE corporate tax
- Reverse flipping: moving your holding company back to India
- GIFT City IFSC for NRIs and Gulf families: what it offers and what to check
Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
Regi Tom Antony & Associates, Chartered Accountants, Kochi
This is general information based on the law as at 24 October 2026, not advice for your particular situation.