Principal purpose test curbs treaty shopping under the amended India-Sri Lanka income tax treaty from fiscal year 2027-28.

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Full Text of the Document

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....The India-Sri Lanka tax treaty is amended to expressly prevent non-taxation or reduced taxation arising from tax evasion, avoidance and treaty-shopping arrangements that indirectly benefit third-State residents. It also introduces a principal purpose test: treaty benefits may be denied where, considering all relevant facts and circumstances, obtaining the benefit was one of the principal purposes of an arrangement or transaction, unless granting it accords with the object and purpose of the relevant treaty provisions. The Protocol entered into force on 19 June 2026 and applies in India to income derived in fiscal years beginning on or after 1 April 2027.....