Quick Summary
In a significant move to provide clarity on the implementation of tax treaties, the Central Board of Direct Taxes (CBDT) has issued Circular 01/2025, emphasizing the application of the Principal Purpose Test (PPT) under India's Double Taxation Avoidance Agreements (DTAAs). Text of the Official Circular is as follows Circular No. 01/2025 dated 21.01.2025 was issued in the form of a guidance to provide clarity and certainty on the application of the Principal Purpose Test (PPT) provision under
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FAQ :
The circular provides guidance and clarity on the application of the Principal Purpose Test (PPT) in India's Double Taxation Avoidance Agreements (DTAAs).
No, the circular only applies to those Indian DTAAs that contain a Principal Purpose Test (PPT) provision.
The circular is not intended to interfere with or interact with any other provisions of Indian DTAAs, including those used for examining treaty entitlement or denying benefits, apart from the PPT.
No, the circular does not interfere with or interact with domestic anti-abuse rules such as GAAR, SAAR, and JAAR, which will continue to operate independently.
No, the clarification does not introduce any new legal interpretation; it reaffirms that the circular applies only to the PPT and does not affect other provisions of the Income-tax Act.
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