India has readied a new framework for Bilateral Investment Treaties (BITs) that is now awaiting Cabinet approval, set to replace the existing 2016 framework currently governing investment pacts with around 20 countries. Once in place, the government expects to sign bilateral investment treaties with 4-5 countries under this updated structure.
Taxation Remains Explicitly Outside the Framework
A key feature carried forward from the earlier model: the new BIT framework will continue to exclude taxation matters from its scope. This isn't a new position, it reflects a deliberate policy choice India has maintained since the 2016 framework, largely shaped by past experience with investor-state disputes where foreign investors challenged Indian tax decisions under earlier-generation BITs. Keeping taxation outside the treaty framework is meant to preserve India's sovereign authority over its own tax policy, without that authority becoming subject to international arbitration triggered by investment treaty provisions.
Why This Update Matters
Bilateral Investment Treaties exist to give foreign investors certain protections and assurances when investing in a partner country, treatment guarantees, dispute resolution mechanisms, and protections against arbitrary state action. Updating this framework after nearly a decade suggests India is looking to make its investment treaty terms more attractive or better calibrated to current economic priorities, while still holding firm on the tax-exclusion principle that has defined its approach since 2016.
With the government targeting agreements with 4-5 countries once the new framework clears Cabinet approval, this update could meaningfully shape how India positions itself to attract fresh foreign investment in the coming years, particularly from countries it hasn't yet signed a BIT with under the current structure.
FAQs
Q1. What is India's new BIT framework set to replace?
The existing 2016 BIT framework, which currently governs India's investment treaties with around 20 countries.
Q2. Will the new framework cover taxation-related disputes?
No. Taxation will continue to be excluded from the framework, consistent with the approach India has maintained since 2016.
Q3. How many countries does India expect to sign new BITs with under this framework?
4-5 countries, once the new framework receives Cabinet approval.