India Tax Treaties With Other Countries

India has signed Double Taxation Avoidance Agreements (DTAA) with over 80 countries.
In India, transactions involving persons having interest between countries with which India has a DTAA, there are agreed rates of tax and jurisdiction on specified types of income.
Therefore, tax relief is provided for those person residents of a country with which India has signed DTAA.
In case country with which no DTAA exists with India, Section 91(1) Income Tax Act allows the provision of relief from double taxation.

India Tax Treaties with China <click me
India Tax Treaties with Taiwan <click me
Other countries on your request

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We set up below judgment criteria on Treaty application:

Scenario:

If you are not an India legal resident, and if your resident country has DTA with India, and if you are without PE (Permanent Establishment), please go to Section A.

If you are not an India legal resident, and if your resident country has DTA with India, and if you are with PE (Permanent Establishment) please go to Section B.

If you are not an India legal resident, and if your resident country has no DTA with India, please go to Section C.

Section A:
Scenario:
If you are not an Indian legal resident, and if your resident country has DTA with India, and if you are without PE (Permanent Establishment), it will be redeemed as “non-India Domestic Sourced Income”.
That means India will levy zero-tax.
However, you still need to send the zero-tax application to India Tax Bureau for being approval.
Below, we will let you understand through Q&A.

DTA-Q-10:
印度的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In India, which foreign legal resident company can apply for a zero tax rate without PE under DTA?
DTA-A-10:
India has signed DTAAs with over 80 countries:

DTA-Q-20:
為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得，可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in India, under the DTA enjoy zero tax rate?
DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if a foreign entity having PE in India. Article 7 regulates if no PE, non-India domestic sourced income will not be levied tax in India.

DTA-Q-30:
哪些情況被視為沒有PE，外資在該國設立子公司會被視為外資的在該國的子公司嗎?
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in India be regarded as a foreign-funded subsidiary in India?
DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in India will not be treated as PE because it is a separate legal entity.
That means if an India Subsidiary pay a service fee to a non-India Parent Company through a service contract signed between the subsidiary and non-India Parent company
as an investor, a non-India Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by India Tax Bureau.
Please see India Transfer Pricing Policy<click me

DTA-Q-40:
外資在印度設立分公司或辦事處，可否適用沒有PE下的零稅率?
If a foreign company establishes a branch or office in India, can the zero-tax rate without PE be applied?
DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or Office in India, then will be considered as India’s domestic Income.
But according to DTA Article 5 item 4, if an Office is only doing a preparatory or auxiliary activity, will apply a zero-tax rate.

DTA-Q-50:
印度依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for India to apply for a zero tax rate under DTAA without PE?
DTA-A-50:
Non-resident in India who wishes to avail treaty benefits are required to furnish the following to the Indian Company (Tax deductor) and they will file to the tax bureau.
1. Tax Residency Certificate (TRC) from the country in which the non-resident is the resident.
2. A No PE declaration letter (prescribed format), to prove the Foreign Company does not have a “PE” in India.

Section B:
Scenario:
If you are not an Indian legal resident, and if your resident country has DTA with India, and if you are with PE (Permanent Establishment), your income will be considered as India domestic sourced income.
As for levying Tax Rate, please be aware: if India Tax rate > DTA Rate, adopt DTA Rate; if India Tax rate < DTA Rate, adopt India Rate. Below, we will let you understand through Q&A.

DTA-Q-60:
被視為印度來源所得的判定要素?
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:

Definition of source income in India.

*Source rule under the Indian domestic tax law (Section 5(2)) states that a non-resident received or deemed to be received in India or accrues or arises or is deemed to accrue or arise in India.

*Section 9 of the Act describes deemed source rules where the income is deemed to arise in India even if it does not actually arise in India.

*Income through business connection in India, any property in India, etc. Business connection includes any business activity carried out through a person who, acting on behalf of the non-resident to conclude contracts etc.

DTA-Q-70:
DTA第五條及第七條優先於印度來源所得的判定要素?
Do Article 5 and Article 7 in the DTA take precedence over the India determination factors on India domestic sourced income?

DTA-A-70:

When DTA is applied, in the event of a different PE definition between India domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail over the domestic regulations.

When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in India, then will be considered non-India domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.

In this scenario, please see section A.

DTA-Q-80:
當非印度稅務居民有印度來源所得，不考慮DTA 情況下，印度稅法扣繳稅率多少?
When non-tax residents of India having India domestic sourced income, what is the withholding tax rate according to India tax regulations excluding DTA?
DTA-A-80:

DTA-Q-90:
If DTA Tax Rate is higher than the India tax rate, apply which tax rate?

DTA-A-90:
As for levying Tax Rate, please be aware: if India Tax rate > DTA Rate, adopt DTA Rate; if India Tax rate < DTA Rate, adopt India Rate.

DTA-Q-A0:
當非印度稅務居民有印度來源所得，依DTA優惠稅率申請的程序為何?
When non-tax residents of India having India domestic sourced income, what is India’s application procedure based on the DTA preferential tax rate?
DTA-A-A0:
Non-resident in India who wishes to avail treaty benefits are required to furnish the following to the Indian Company (Tax deductor) and they will file to the tax bureau.
1. Tax Residency Certificate (TRC) from the country in which the non-resident is the resident.
2. A No PE declaration letter (prescribed format), to prove the Foreign Company does not have a “PE” in India.

Section C:

DTA-Q-B0:
As an investor, if your country has not signed DTA with India, what kinds of tax rates when you have India relevant income?

DTA-A-Q0:
If you are not an Indian legal resident, and if your resident country has no DTA with India,
Whatever you are with PE or without PE, all kinds of income will be levied according to India’s domestic sourced income.
Besides, it will be levied by India Tax Rates.

Please be aware below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

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(version: 2022/03)

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