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Indian foreign tax credit can usually offset qualifying Mauritius tax when an Indian tax resident is taxed on the same income in both countries. The credit is not automatic: under Article 23 of the India–Mauritius tax treaty and India’s foreign-tax-credit rules, you must match the income, calculate the credit separately by country and source, respect the Indian-tax cap, and file the prescribed statement with supporting evidence. The exact form and deadline for your assessment year need checking because the available Form 67 and Rule 128 materials use the 1961 Act framework while a 2026 treaty notification refers to the 2025 Act.
This guide explains the eligibility tests, calculation, documents, Form 67 workflow, disputed-tax rules, multi-year reporting and the treaty change that took effect in 2026. It is general information, not a computation for a particular taxpayer.
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Can an Indian tax resident claim credit for tax paid in Mauritius?
Generally, yes, if you are resident in India, the same income is offered to tax or assessed in India, and the Mauritius charge is a qualifying tax imposed under Mauritius law and the India–Mauritius treaty. The credit is limited to the Indian tax attributable to that Mauritius-source income. A Mauritius withholding certificate by itself does not establish that every treaty and Indian-rule condition has been met.
Rule 128 describes foreign-tax credit (FTC) for a resident taxpayer in respect of foreign tax on income that is offered to tax or assessed in India. Start by confirming:
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- your Indian tax residence for the relevant year;
- the assessment year and the income category (for example, salary, interest, dividend, business profit or capital gain);
- where the income arose and whether Mauritius had a treaty basis to tax it;
- whether Mauritius tax was withheld at source or paid directly after an assessment; and
- whether the income was reported in India in one year or spread over several years.
If the charge is not a tax covered by the treaty or applicable Indian rules, it may not qualify. A tax, surcharge and cess can be included in the credit calculation under the cited Rule 128 material, but interest, fee and penalty cannot.
What does Article 23 of the India–Mauritius treaty allow?
Article 23 uses an ordinary credit method: India gives credit for qualifying Mauritius tax against Indian tax on the same profits or income, but never beyond the Indian tax attributable to that income. The treaty wording is:
“The amount of Mauritius tax payable, under the laws of Mauritius and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of profits or income arising in Mauritius, which has been subjected to tax both in India and in Mauritius, shall be allowed as a credit against the Indian tax payable in respect of such profits or income provided that such credit shall not exceed the Indian tax (as computed before allowing any such credit) which is appropriate to the profits or income arising in Mauritius.”
Read the conditions together. The income must be taxable in both countries, the Mauritius tax must be payable under Mauritius law and the treaty, and the credit is against Indian tax on that same income. If Mauritius tax is higher, the excess is not converted into an Indian refund or carried over merely because both countries charged tax. If treaty relief does not apply, an applicable Indian unilateral-relief provision may be relevant, but its statutory wording and form requirements must be checked for the assessment year.
The department’s double-taxation-relief guidance describes treaty and unilateral relief at a high level; the Rule 128 text is the stronger source for the calculation and evidence details discussed below.
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How is the allowable Mauritius credit calculated?
Calculate the credit separately for each income source arising in Mauritius, then aggregate the permitted amounts. For each source, the practical ceiling is the lower of (1) qualifying Mauritius tax and (2) Indian tax attributable to that same income, after applying the treaty limit and other applicable rules.
Per-source calculation:
- Determine the foreign income included in the Indian return for the assessment year.
- Compute the Indian tax attributable to that income before the FTC.
- Convert the qualifying Mauritius tax into Indian rupees using the exchange-rate rule applicable to the year. The Rule 128 material refers to the telegraphic-transfer buying rate on the last day of the month immediately preceding the month in which the tax was paid or deducted.
- Compare the two amounts. The credit for that source is generally the lower amount, subject to the treaty and any special rule for disputed tax.
Illustration (hypothetical): Suppose ₹300,000 of Mauritius-source interest is included in your Indian return. Indian tax attributable to that interest is ₹72,000. Mauritius tax, converted under the applicable exchange-rate rule, is ₹90,000. The Indian FTC for that source cannot exceed ₹72,000; the remaining ₹18,000 is not an additional Indian credit. If Mauritius tax were ₹45,000, the credit would generally be limited to ₹45,000, leaving ₹27,000 of Indian tax payable on that income.
Do not combine unrelated sources to absorb a high Mauritius charge. Rule 128 describes a country-and-source approach, so interest, dividends, employment income and business profits should be matched to their own foreign-tax amounts and Indian-tax figures. Keep the computation showing the allocation where one Mauritius payment relates to more than one source.
What if the same income is reported in India over more than one year?
Match the foreign tax to the years in which the underlying income is offered to tax or assessed in India. Where the income is spread over multiple years, the Rule 128 material says the FTC is spread over those years in the proportion in which the income is offered or assessed in India.
For example, if a Mauritius assessment covers income that India recognizes 60% in one year and 40% in the next, document that allocation and claim the corresponding portions in the respective years rather than claiming the entire foreign tax in the first return. Keep the reconciliation between the Mauritius certificate, the Indian income schedules and each Form 67.
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Which documents prove the income and Mauritius tax?
Prepare evidence before filing. Rule 128 calls for an income statement and a certificate or statement showing the nature of the income and the foreign tax. The proof should identify the taxpayer, income period, income type, tax amount and whether the tax was paid or withheld.
| Situation | Evidence to retain | Why it matters |
|---|---|---|
| Tax paid directly to Mauritius | Mauritius tax authority certificate or assessment, tax computation and payment acknowledgment or challan | Shows the tax was imposed and paid, not merely estimated |
| Tax withheld by a payer | Withholding certificate or payer statement showing gross income, tax deducted and date | Connects the deduction to the specific income reported in India |
| Taxpayer-signed statement | Signed statement of income nature and foreign tax, plus payment proof for paid tax or deduction proof for withholding | Rule 128 requires supporting acknowledgment when the statement is not issued by the foreign authority or payer |
| Income reported in several years | Year-by-year allocation schedule and copies of each Indian return and Form 67 | Supports the proportional spread of the credit |
| Disputed Mauritius tax | Appeal or dispute records, settlement/payment evidence and required undertaking that no refund will be claimed | Disputed tax is generally excluded until the rule’s conditions are met |
Keep the exchange-rate source and calculation, treaty article relied on, and any correspondence explaining why Mauritius had taxing rights. A withholding certificate proves a deduction; it does not, by itself, prove that the rate or tax was treaty-compliant.
How do I file Form 67 for the foreign tax credit?
The Income Tax Department’s Form 67 User Manual describes an online e-Filing workflow. Portal labels and deadlines can change, so use the instructions displayed for your assessment year.
- Finish the Indian income computation first. Report the Mauritius income in the correct return and schedules. The foreign income and the tax claimed must correspond to the same income and year.
- Sign in to the Income Tax e-Filing portal. Use the taxpayer’s account and ensure the relevant return or assessment-year record is available.
- Open the forms service. The manual’s route is e-File → Income Tax Forms → File Income Tax Forms. Search for “Form 67” and select the applicable assessment year.
- Complete Part A. Enter the country (Mauritius), foreign income and tax details, and the treaty article or domestic provision relied on. The official Form No. 67 includes fields for the income source, foreign income, foreign tax, Indian tax, treaty article and rate, and the credit claimed under treaty or domestic provisions.
- Complete Part B. Allocate the credit by country and income source, show the Indian-tax and foreign-tax figures, and answer the questions about disputed tax and refunds connected with loss carryback.
- Attach the evidence. Upload the foreign authority or payer certificate, payment acknowledgment or proof of deduction, income statement and any required dispute documents. Use readable files whose amounts match the entries in the form.
- Verify and submit. Complete the declaration and verification using the available electronic method. Save the acknowledgment, submitted form, attachments and computation.
The older official materials describe a filing timeline linked to the return and assessment-year process, but the available Rule 128 and manual texts are framed under the Income-tax Act, 1961. Because the 2026 treaty notification refers to the Income-tax Act, 2025, confirm the current prescribed form, due date, transition rule and whether a revised or additional statement is required for your year. Do not copy a deadline from an older article or a prior assessment year.
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Usually not immediately. The Rule 128 material generally excludes disputed foreign tax unless specified conditions are met, including settlement of the dispute, payment, submission of evidence and an undertaking that you will not seek a refund of the amount for which credit was claimed.
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Mark the dispute accurately in Form 67 and retain appeal, settlement and payment records. If the dispute is resolved or the Mauritius tax is later refunded, review the Indian credit and any corrective filing obligation rather than leaving the original claim unchanged.
What happens if Mauritius tax is later refunded after a loss carryback?
Form 67 asks about refunds related to carryback of losses. Rule 128 requires a further Form 67 where a current-year loss is carried back and that carryback produces a refund of foreign tax previously credited. Recalculate the affected years, identify the refunded amount and submit the additional statement in the manner and time required for the assessment year.
This is separate from a routine foreign-tax refund. Any later reduction, repayment or refund that changes the tax originally credited should be reconciled with the Indian return and records.
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It can affect whether a taxpayer is entitled to treaty benefits, although it does not automatically determine the Article 23 calculation. India’s Notification No. 135/2026, dated October 13, 2026, says the protocol signed on March 7, 2024, entered into force on August 10, 2026. It replaces the preamble and adds Article 27B, “Entitlement to Benefits,” a principal-purpose test.
The new provision states:
“A benefit under this Convention shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting the benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of this Convention.”
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The notification says the provisions take effect from entry into force without regard to the tax levy date or taxable year. If your Mauritius structure, transaction or residence arrangement was designed in a way that makes treaty entitlement material, document the commercial purpose and obtain advice on the full treaty text. The anti-abuse rule does not mean every Mauritius tax credit fails; it means the treaty-benefit analysis must be done on the facts.
What are the most common Form 67 mistakes?
- Assuming both-country taxation guarantees a credit. Check residence, income classification, treaty coverage and the nature of the Mauritius charge.
- Claiming more than the Indian tax cap. Excess Mauritius tax is not an Indian refund or an unrestricted carryforward.
- Pooling sources. Compute separately for each Mauritius-source income stream.
- Using the wrong year. Match the foreign tax to the year in which India taxes the underlying income, including proportional allocation over several years.
- Uploading incomplete proof. A certificate without payment or deduction evidence may not satisfy the documentation rule where taxpayer-signed evidence is used.
- Ignoring exchange-rate support. Keep the rate, date and calculation used to convert Mauritius tax into rupees.
- Reusing an old deadline. Verify the current Form 67 workflow and deadline for the assessment year, particularly during the 1961 Act/2025 Act transition.
- Leaving disputes or refunds unreported. Answer the relevant Form 67 questions and file a further statement when the rules require it.
- Overlooking the 2026 protocol. Consider the principal-purpose test where treaty entitlement is significant.
What should I check before submitting the claim?
- Confirm Indian residence and the assessment year.
- List every Mauritius-source income item and its Indian schedule.
- Identify whether Mauritius tax was withheld or paid after assessment.
- Verify that the charge is a qualifying Mauritius tax under domestic law and the treaty.
- Compute Indian tax and Mauritius tax separately for each source.
- Apply the lower-of-Indian-tax-or-qualifying-foreign-tax limit.
- Convert the foreign tax using the rule applicable to the year and retain the rate evidence.
- Obtain certificates, challans, payment acknowledgments and deduction proof.
- Check for disputes, refunds or loss carrybacks.
- Review the current portal form, deadline and transition instructions, then save the acknowledgment.
When is professional advice sensible?
Consider an India–Mauritius cross-border tax adviser when residence is uncertain, the income is allocated across years, the Mauritius tax is disputed, a company or trust is involved, treaty entitlement depends on a transaction’s purpose, or the 2025 Act transition affects the form or deadline. Professional help is optional for a straightforward, well-documented withholding claim, but the adviser should work from your certificates, Indian return, tax computation and treaty facts rather than treating the credit as automatic.
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Frequently Asked Questions
Can I claim an Indian credit if Mauritius tax was only withheld and not finally assessed?
A withholding amount can be relevant, but you still need evidence of the deduction and the nature of the income, and the charge must qualify under the treaty and Indian rules. Keep the payer’s statement and reconcile the gross income and tax deducted to the Indian return.
Is Mauritius tax credit available against Indian interest and cess?
The cited Rule 128 material allows credit against tax, surcharge and cess. It does not allow credit against interest, fee or penalty, so separate those amounts in your computation.
What if my Mauritius certificate is issued in a foreign currency?
Translate the qualifying tax using the exchange-rate rule applicable to the assessment year and retain the rate and date used. The Rule 128 material refers to the telegraphic-transfer buying rate on the last day of the month before payment or deduction.
Does the 2026 principal-purpose test apply only to companies?
The protocol text is framed around an arrangement or transaction and an item of income, not a particular taxpayer type. Its application depends on all relevant facts and the object and purpose of the treaty provision, so individuals and entities should assess it where treaty benefits are material.
