Whoever said wishes don’t come true hasn’t explored our offers!
  • Double Tax Avoidance Agreement (DTAA) versus Income Tax Act

    There are non-resident Indians (NRIs) that have established sources of income overseas, and face the problem of being taxed in the country in which they’re earning and in India – hence DTAAs or Double Tax Avoidance Agreements have been arranged between India and many other countries. Sometimes, there is confusion about how the income earned will be treated from a taxation perspective. Non-resident Indians earning income through dividends, interest, royalty, fees, etc. among other sources will be taxed under either the Income Tax Act, or as per the relevant rates as prescribed in the relevant Double Tax Avoidance Agreement (DTAA), whichever is more beneficial to the NRI.

    Refer the following notes in order to better understand the below table:

    1. Dividend / Interest that’s earned by the Indian Government, The Reserve Bank of India, and other specified institutions is exempted from taxation in the country in which the income arises (the country of source).
    2. Fees and Royalties for technical services will be taxable in the country in which the income arises (the country of source) at different rates for different categories under this heading. The difference in these rates are subject to various conditions and the very nature of the services for which payment is made. Different categories are taxed at different rates.
    3. Royalties and fees for technical services are taxed in the country of source at the following rates:
      • 10% for royalties related to the payments for the use and the right to use scientific, commercial, or industrial equipment.
      • 20% in case of fees for technical services.
      • 20% for other royalties.
    4. Royalties and fees for technical services received by:
      • a foreign company, or
      • a non-resident non-corporate assessee from:
      • the Government, or
      • an Indian company / concern will be taxed at 10% (if the agreement is made at any time after 31 March 1976.) This rule applies from the Assessment Year 2016 – 2017.
    5. Dividends:
      • When dividends are paid out of income / gains that are derived directly / indirectly from immovable property as described in Article 6, from investments that distribute their income annually, and whose income from immovable property is exempted from taxation – will be charged at 15% of the gross amount.
      • In all other cases, 10% of the gross amount will be charged.
    6. Tax on Dividends:
      • Dividend income earned from Global Depository Receipts under Section 115AC(1)(b) of the Income Tax Act, 1961 (other than dividends referred to in Section 115-O) will be charged at 10%.
      • Dividend income received by a non-resident non-corporate assessee, or a foreign company under Section 115A (other than dividends referred to in section 115-O) will be charged at 20%.
      • Dividend income received by a foreign institutional investor under Section 115AD (other than dividends referred to in section 115-O) will be charged at 20%.
    7. Tax on Interest:
      • Interest received by a foreign company, or a non-resident non-corporate assessee from the Government or from an Indian concern on moneys borrowed or debt incurred by the Government or the respective Indian concern in foreign currency will be charged at 20% under Section 115A.
      • Income from bonds of an Indian company (which adhere to certain schemes that the Central Government notifies the public through the Official Gazette), or on bonds of a public sector company that are sold by the Government, and purchased by an NRI in foreign currency will be charged at 10% under Section 115AC.
      • Interest received from infrastructure debt funds (according to the reference in Section 10(47)) will be charged at 5%.
      • Interest received from Indian companies (as specified in Section 194LC) will be charged at 5%.
      • Interest that adheres to the definitions and extents specified under Section 194LD will be charged at 5%.
      • Interest in the form of distributed income as specified in Section 194LBA(2) will be charged at 5%.
    8. The Double Tax Avoidance Agreement (DTAA) currently in force (since 27th January, 1986) which was signed with the Czech Republic is also applicable to the Slovak Republic.
    9. If the beneficial owner is a company that directly holds a minimum of 10% of the capital of the dividend-paying company.
    10. 5% if beneficial owner of shares is a company that holds a minimum of 10% of the shares of the dividend-paying company.
    11. If the beneficial owner is a company that directly owns a minimum of 25% of the dividend-paying company’s capital stock, and has owned this for a minimum of 2 consecutive years.
    12. 5% if the recipient company owns a minimum of 25% of the shares in the dividend-paying company.

    In the below table, refer the number in bold and in brackets (x) to the list above for further clarity:

    Country Dividend (not being covered under Section 115-O) Interest Royalty Fee for Technical Services
    Tax Treaty Income Tax Act (6) Tax Treaty Income Tax Act (7) Tax Treaty Income Tax Act (4) Tax Treaty Income Tax Act (4)
    Albania 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Armenia 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Australia 15% 20% ; 10% 15% 20% ; 10% ; 5% 10% ; 15% (2) 10% 10% ; 15% (2) 10%
    Austria 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Bangladesh 10% if the recipient company holds at least 10% of the dividend paying company’s capital. ; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Belarus 10% if the recipient company holds at least 25% shares. ; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Belgium 15% 20% ; 10% 15% ; 10% if loan is granted by a bank 20% ; 10% ; 5% 10% 10% 10% 10%
    Bhutan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Botswana 7.5% if 25% of shares in the investee company are held by the shareholder company. ; 10% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Brazil 15% 20% ; 10% 15% (1) 20% ; 10% ; 5% 25% for trademark use.; 15% for other cases. 10% 15% 10%
    Bulgaria 15% 20% ; 10% 15% (1) 20% ; 10% ; 5% 15% for royalties related to artistic, scientific works.; 20% for other cases. 10% 20% 10%
    Canada 15% if the recipient company holds at least 10% voting power in the paying company.; 25% for other cases. 20% ; 10% 15% (1) 20% ; 10% ; 5% 10% to 15% 10% 10% to 15% 10%
    China 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Columbia 5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Croatia 5% if the recipient company holds at least 10% of the paying company’s capital.; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Cyprus 10% if the recipient company holds at least 10% of the paying company’s capital.; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% 10% ; 15% 10%
    Czech Republic (8) 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Denmark 15% if the recipient company holds at least 25% of the paying company’s shares.; 25% for other cases. 20% ; 10% 10% if the loan is granted by a bank ; 15% for other cases (1) 20% ; 10% ; 5% 20% 10% 20% 10%
    Estonia 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Ethiopia 7.5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Finland 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Fiji 5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    France 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Georgia 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Germany 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Hungary 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Indonesia 10% if the recipient company holds at least 25% of the paying company’s shares.; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% No separate provisions. 10%
    Iceland 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Ireland 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Israel 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Italy 15% if the recipient company holds at least 10% of the paying company’s shares.; 25% for other cases. 20% ; 10% 15% (1) 20% ; 10% ; 5% 20% 10% 20% 10%
    Japan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Jordan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 20% 10% 20% 10%
    Kazakhstan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Kenya 15% 20% ; 10% 15% (1) 20% ; 10% ; 5% 20% 10% 17.5% 10%
    Korea 15% if the recipient company holds at least 20% of the paying company’s capital.; 20% for other cases. 20% ; 10% 10% if interest is paid to a bank ; 15% for other cases (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Kuwait 10% (1) 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Kyrgyz Republic 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Latvia 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Lithuania 5% (9) ; 15% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Luxembourg 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Malaysia 5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Malta 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Mongolia 15% 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Mauritius 5% if the recipient company holds at least 10% of the paying company’s capital.; 15% for other cases. 20% ; 10% No rates have been specified. 20% ; 10% ; 5% 15% 10% No separate provisions. 10%
    Montenegro 5% ; 15% in some cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Myanmar 5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Morocco 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Mozambique 7.5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Namibia 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Nepal 5% (10) ; 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% No separate provisions. 10%
    Netherlands 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    New Zealand 15% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Norway 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Oman 10% if the recipient company holds at least 10% of the paying company’s shares.; 12.5% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Philippines 15% if the recipient company holds at least 10% of the paying company’s shares.; 20% for other cases. 20% ; 10% 10% if the interest is received by an insurance company or bank ; 15% for other cases (1) 20% ; 10% ; 5% 15% if it is payable towards any Government of India approved collaboration agreement. 10% No separate provisions. 10%
    Poland 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Portuguese Republic 10% (11) ; 15% 20% ; 10% 10% 20% ; 10% ; 5% 10% 10% 10% 10%
    Qatar 5% if the recipient company holds at least 10% of the paying company’s shares.; 10% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Romania 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Russian Federation 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Saudi Arabia 5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Serbia 5% if the recipient company holds at least 25% of the paying company’s shares.; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Singapore 10% if the recipient company holds at least 25% of the paying company’s shares.; 15% for other cases. 20% ; 10% 10% if the interest is received by an insurance company or bank ; 15% for other cases (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Slovenia 5% if the recipient company holds at least 10% of the paying company’s shares.; 15% for other cases. 20% ; 10% 10% 20% ; 10% ; 5% 10% 10% 10% 10%
    South Africa 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Spain 15% 20% ; 10% 15% (1) 20% ; 10% ; 5% 10% ; 20% (3) 10% 20% (3) 10%
    Sri Lanka 7.5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Sudan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Sweden 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Swiss 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Syrian Arab Republic 5% if the recipient company holds at least 10% of the paying company’s shares.; 10% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Tajikistan 5% if the recipient company holds at least 25% of the paying company’s shares.; 10% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Tanzania 5% (12) ; 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    Thailand 15% if the recipient company holds at least 10% of the paying industrial company’s capital.; 20% for other cases. 20% ; 10% 10% if the interest is received by an insurance company or bank ; 25% for other cases (1) 20% ; 10% ; 5% 15% 10% No separate provisions. 10%
    Trinidad and Tobago 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Turkey 15% 20% ; 10% 10% if the interest is received by an insurance company or bank ; 15% for other cases (1) 20% ; 10% ; 5% 15% 10% 15% 10%
    Turkmenistan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Uganda 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Ukraine 10% if the recipient company holds at least 25% of the paying company’s shares.; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    United Arab Emirates 10% 20% ; 10% 5% if the interest is received by an insurance company or bank ; 12.5% for other cases (1) 20% ; 10% ; 5% 10% 10% No separate provisions. 10%
    United Mexican States 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    United Kingdom 15% ; 10% (5) 20% ; 10% 10% if the interest is received by an insurance company or bank ; 15% for other cases (1) 20% ; 10% ; 5% 10% ; 15% (2) 10% 10% ; 15% (2) 10%
    United States 15% if the recipient company holds at least 10% of the paying company’s voting stock.; 25% for other cases. 20% ; 10% 10% if the interest is received by an insurance company or bank ; 15% for other cases (1) 20% ; 10% ; 5% 10% ; 15% (2) 10% 10% ; 15% (2) 10%
    Uruguay 5% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Uzbekistan 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Vietnam 10% 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%
    Zambia 5% if the recipient company holds at least 25% of the paying company’s shares for at least 6 months.; 15% for other cases. 20% ; 10% 10% (1) 20% ; 10% ; 5% 10% 10% 10% 10%

    News about DTAA versus Income Tax Act

    • 10 per cent tax for services under revised DTAA

      India-Mauritius tax treaty has been amended to include a new clause which allows source-based taxation of 10 per cent on technical and consultancy fees. Also, as per a new establishment, any employees working in a foreign company in India will be liable to pay income tax if he or she has spent 90 or more days in India in the past one year/12 months.

      So far only income of those employees of foreign company was taxable for which there was an office space in India. However, from now on if any employee of a foreign company spends more than 90 days in India then the income of that company in India will be taxed at 40 per cent.

      24th May 2016

    Tax Calculator
    Forms
    Sections
  • reTH65gcmBgCJ7k
    This Page is BLOCKED as it is using Iframes.