India–Sri Lanka DTAA Protocol Notified to Prevent Treaty Abuse

The Ministry of Finance, through Notification No. 88/2026 dated 16 July 2026, has notified the Protocol amending the India–Sri Lanka Double Taxation Avoidance Agreement (DTAA).

The Protocol was signed in New Delhi on 16 December 2024 and entered into force on 19 June 2026. Its key provisions include:

• Revising the DTAA’s preamble to clarify that tax relief should not create opportunities for non-taxation, reduced taxation, tax evasion, tax avoidance or treaty shopping.
• Replacing paragraph 6 of Article 28 with the Principal Purpose Test (PPT).
• Denying treaty benefits where obtaining such benefits was one of the principal purposes of an arrangement or transaction, unless granting the benefit aligns with the object and purpose of the DTAA.
• Giving effect to the amended provisions in India for income earned during fiscal years beginning on or after 1 April 2027.

The Protocol will remain effective for as long as the India–Sri Lanka DTAA continues to remain in force. 

CA Sansaar

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