CBDT issues Guidance Circular on Application of Principal Purpose Tests Under DTAA

The CBDT has issued a guidance circular on applying the Principal Purpose Test (PPT) under Double Taxation Avoidance Agreements (DTAA). This test aims to prevent tax avoidance by scrutinizing the primary purpose of transactions to ensure they align with the intent of the DTAA. The guidance provides clarity on the application of the PPT, helping taxpayers understand the rules and ensuring compliance with international tax standards. The circular is a step forward in the government's efforts to combat tax evasion through international agreements and ensure that tax benefits are not exploited for non-legitimate purposes.