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ax Rates DTAA v. Income-tax Act

Certain income of non-resident, inter-alia, dividend, interest, royalty or fees for technical services shall be taxable as per the rates prescribed under the Income-tax Act or as per the rates prescribed under the DTAAs, whichever is more beneficial to such non-resident. This write up provides all such rates as prescribed under the Act and under various DTAAs entered into between Indian and various foreign countries.

Tax rates as per IT Act vis a vis Tax Treaties

 

Name of Country Dividend (not being covered under section 115-O) Interest Royalty Fee for Technical Services
  Tax rate IT Act Tax rate IT Act Tax rate IT Act Tax rate IT Act
Albania 10% 20% 10%[Note2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Armenia 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Australia 15% 20% 15% 20% [Note 3] 25%(Note 6) [Note 3] 25%(Note 6)
Austria 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Bangladesh 10% (if at least 10% of the capital of the company paying the dividend is held by the recipient) 20% 10% [Note 2] 20% 10% 25%(Note 6) No separate provision
Belarus 10% if paid to a company holding 25% shares; otherwise 15% 20% 10% [Note 2] 20% 15% 25%(Note 6) 15% 25%(Note 6)
Belgium 15% 20% 15% (10% if granted by a bank) 20% 10% 25%(Note 6) 10% 25%(Note 6)
Botswana 7.5% (if shareholder is a company and holds at least 25% shares in the investee-company); otherwise 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Brazil 15% 20% 15% [Note 2] 20% 25% for use of trademark; 15% for others 25%(Note 6) No separate provision
Bulgaria 15% 20% 15% [Note 2] 20% 15% of royalty relating to literary, artistic, scientific works other than films or tapes used for radio or television broadcasting; 20% in other cases 25%(Note 6) 20% 25%(Note 6)
Canada 15% if at least 10% of the shares of the company paying the dividends is held by the recipient of dividend; 25% in other cases 20% 15% [Note 2] 20% 10%-20% 25%(Note 6) 10%-20% 25%(Note 6)
China 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Cyprus 10% if at least 10% of the capital of the company paying dividend is held by the recipient, 15% in all other cases 20% 10% [Note 2] 20% 15% 25%(Note 6) 10% 25%(Note 6)
Czeck Republic 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Denmark 15% if at least 25% of the shares of the company paying the dividend is held by the recipient; 20% in other cases 20% 10% if loan is granted by bank; 15% for others [Note 2] 20% 20% 25%(Note 6) 20% 25%(Note 6)
Germany 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Finland 15% 20% 10% [Note 2] 20% 15%-20% during 1997-2001, 15% for subsequent years; 10% for equipment royalty 25%(Note 6) Same as in case of royalty 25%(Note 6)
France 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Greece 20% 20% 20% 20% 25%(Note 6) 25%(Note 6) No separate provision
Hungary 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Indonesia 10% if at least 25% of the shares of the company paying the dividend is held by the recipient; 15% in other cases 20% 10% [Note 2] 20% 15% 25%(Note 6) No separate provision
Iceland 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Ireland 10%-15% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Israel 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Italy 15% if at least 10% of the shares of the company paying dividend is beneficially owned by the recipient company; 20% in other cases 20% 15% [Note 2] 20% 20% 25%(Note 6) 20% 25%(Note 6)
Japan 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Jordan 10% 20% 10% [Note 2] 20% 20% 25%(Note 6) 20% 25%(Note 6)
Kazakstan 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Kenya 15% 20% 15% [Note 2] 20% 20% 25%(Note 6) 17.5% 25%(Note 6)
Korea 15% if at least 20% of the capital of the company paying dividend is held by the recipient; 20% in other cases 20% 10% if interest is paid to a bank; 15% for others [Note 2] 20% 15% 25%(Note 6) 15% 25%(Note 6)
Kuwait 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Kyrgyz Republic 10% 20% 10% 20% 15% 25%(Note 6) 15% 25%(Note 6)
Latvia 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Libyan Arab Jamahiriya 20% 20% 20% 20% 25%(Note 6) 25%(Note 6) No separate provision
Luxembourg 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Malaysia 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Malta 10% if at least 25% of the shares of the company paying dividend is held by the recipient company; 15% in other cases 20% 10% [Note 2] 20% 15% 25%(Note 6) 10% 25%(Note 6)
Mangolia 15% 20% 15% [Note 2] 20% 15% 25%(Note 6) 25% 25%(Note 6)
Mauritius 5% if at least 10% of the capital of the company paying the dividend is held by the recipient; 15% in other cases 20% 20% [Note 2]; Nil in some cases 20% 15% 25%(Note 6) No separate provision
Montenegro 5% (in some cases 15%) 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Myanmar 5% 20% 10% 20% 10% 25%(Note 6) No separate provision
Morocco 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Namibia 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Nepal 10% if at least 10% of the shares of the company paying the dividend is held by the recipient; 20% in other cases 20% 10% if interest is paid to bank 15% for others [Note 2] 20% 15% 25%(Note 6) No separate provision
Netherlands 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
New Zealand 15% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Norway 15% if at least 25% of the capital of the company paying the dividend is held by the recipient; 20% in other cases 20% 15% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Oman 10% if at least 10% of shares are held by the recipient; 12.5% in other cases 20% 10% [Note 2] 20% 15% 25%(Note 6) 15% 25%(Note 6)
Philippines 15% if at least 10% of the shares of the company paying the dividend is held by the recipient; 20% in other cases 20% 10% if interest is received by a financial institution or insurance company; 15% in other cases 20% 15% if it is payable in pursuance of any collaboration agreement approved by the Government of India 25%(Note 6) No separate provision
Poland 15% 20% 15% [Note 2] 20% 22.5% 25%(Note 6) 22.5% 25%(Note 6)
Portuguese Republic 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Quatar 5%-10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Romania 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Russian Federation 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Saudi Arabia 5% 20% 10% 20% 10% 25%(Note 6) No separate provision
Serbia 5% (if recipient is company and holds 25% shares) otherwise 15% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Singapore 10% if at least 25% of the shares of the company paying the dividend is held by the recipient; 15% in other cases 20% 10% if loan is granted by a bank/similar institute including an insurance company; 15% for others 20% 10% 25%(Note 6) 10% 25%(Note 6)
Slovenia 5-15% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
South Africa 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Spain 15% 20% 15% [Note 2] 20% [Note 4] 25%(Note 6) [Note 4] 25%(Note 6)
Sri Lanka 7.5% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Sudan 10% 20% 10% 20% 10% 25%(Note 6) No separate provision
Sweden 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Swiss 10% 20% 10% [Note 5] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Syrian Arab Republic 10% (5% if shareholder is a company holding at least 10% shares) 20% 10% 20% 10% 25%(Note 6) No separate provision
Tajikistan 10% (5% if shareholder is a company and holds 25% shares) 20% 10% 20% 10% 25%(Note 6) No separate provision
Tanzania 10% if at least 10% of the shares of the company paying the dividend is held for a period of at least 6 months prior to the date of payment of the dividend; 15% in other cases 20% 12.5% 20% 20% 25%(Note 6) No separate provision
Thailand 15% if dividend is paid by an industrial company and at least 10% of capital of such company is held by the recipient; 20% in other cases 20% 10% for financial institutions and insurance company; 20% for others [Note 2] 20% 15% 25%(Note 6) No separate provision
Trinidad and Tobago 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Turkey 15% 20% 10% if recipient is bank, etc.; 15% in other cases [Note 2] 20% 15% 25%(Note 6) 15% 25%(Note 6)
Turkmenistan 10% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
Uganda 10% 20% 10% 20% 10% 25%(Note 6) 10% 25%(Note 6)
Ukraine 10%-15% 20% 10% [Note 2] 20% 10% 25%(Note 6) 10% 25%(Note 6)
United Arab Emirates 5% if at least 10% of the capital of the company paying dividend is held by the recipient; 15% in other cases 20% 5% if loan is granted by a bank/similar financial institute; 12.5% for others 20% 10% 25% (Note 6) No separate provision
United Arab Republic 10% 20% 20% 20% 25% (Note 6) 25% (Note 6) No separate provision
United Kingdom 15%/10%(Note 7) 20% 10% if interest is paid to a bank; 15% for others [Note 2] 20% [Note 3] 25% (Note 6) [Note 3] 25%(Note 6)
United States 15% if at least 10% of the voting stock of the company paying the dividend is held by the recipient; 20% in other cases 20% 10% if loan is granted by a bank/similar institute including insurance company; 15% for others 20% [Note 3] 25% (Note 6) [Note 3] 25%(Note 6)
Uruguay 5% 20% 10% [Note 2] 20% 10% 25% (Note 6) 10% 25%(Note 6)
Uzbekistan 15% 20% 15% [Note 2] 20% 15% 25% (Note 6) 15% 25%(Note 6)
Vietnam 10% 20% 10% [Note 2] 20% 10% 25% (Note 6) 10% 25%(Note 6)
Zambia 5% if at least 25% of the shares of the company paying the dividend is held for a period of at least 6 months prior to the date of payment of the dividend; 15% in other cases 20% 10% [Note 2] 20% 10% 25% (Note 6)  

1. 10 per cent of the gross amount of the interest on loans made or guaranteed by a bank or other financial institution carrying on bona fide banking or financing business or by an enterprise which holds directly or indirectly at least 10 per cent of the capital of the company paying the interest.

2. Dividend/interest earned by the Government and certain institutions like the Reserve Bank of India is exempt from taxation in the country of source.

3. Royalties and fees for technical services would be taxable in the country of source at the following rates :

 a.  10 per cent in case of rental of equipment and services provided along with know-how and technical services ;

 b.  any other case—

 i.  during first five years of the agreement—

- 15 per cent if the payer is Government or specified organisation;

- 20 per cent in other cases;

 ii.  subsequent years, 15% in all cases.

Income of Government and certain institutions will be exempt from taxation in the country of source.

4. Royalties and fees for technical services would be taxable in the country of source at the following rates :

a.  10 per cent in case of royalties relating to the payments for the use of, or the right to use, industrial, commercial or scientific equipment;

b.  20 per cent in case of fees for technical services and other royalties.

5. 10 per cent of the gross amount of the interest on loans made or guaranteed by a bank or other financial institution carrying on bona fide banking or financing business or by an enterprise which holds directly or indirectly at least 20 per cent of the capital of the company paying the interest.

6. Up to Assessment 2013-14, Royalty and fees for technical service was to be taxed as under:-

Agreement entered between Non-Resident and Indian concern or government- Tax Rate
After 31 March 1976 but before 1 June 1997 30%
After 31 May 1997 but before 1 June 2005 20%
After 31 May 2005 10%

From Assessment Year 2014-15, Royalty and fees for technical service is to be taxed at the rate of 25% if agreement is made at any time after 31 March 1976.

7. (a)15 per cent of the gross amount of the dividends where those dividends are paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 by an investment vehicle which distributes most of this income annually and whose income from such immovable property is exempted from tax;

(b) 10 per cent of the gross amount of the dividends, in all other cases

 

*If the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends.

**5% if beneficial owner of shares is a company and it holds at least 10% of shares of the company paying the dividends.

*** if the beneficial owner is a company that, for an uninterrupted period of two fiscal years prior to the payment of the dividend, owns directly at least 25 per cent of the capital stock of the company paying the dividends.

****5% if recipient company owns at least 25% share in the company paying the dividend.

1. Dividend/Interest earned by the Government and certain specified institutions, inter-alia, Reserve Bank of India is exempt from taxation in the country of source.

2. Royalties and fees for technical services would be taxable in the country of source at the rates prescribed for different categories of royalties and fees for technical services. These rates shall be subject to various conditions and nature of services/royalty for which payment is made. For detailed conditions refer to relevant Double Taxation Avoidance Agreements.

3. Royalties and fees for technical services would be taxable in the country of source at the following rates:

a. 10 per cent in case of royalties relating to the payments for the use of, or the right to use, industrial, commercial or scientific equipment;

b. 20 per cent in case of fees for technical services and other royalties.


4. From Assessment Year 2016-17, Royalty and fees for technical service received by a foreign company or a non-resident non-corporate assessee from government or an Indian concern shall be taxed at the rate of 10% if agreement is made at any time after 31 March 1976.

From Assessment Year 2017-18, any income of a person resident in India by way of royalty in respect of a patent developed and registered in India shall be taxable at the rate of 10% as per section 115BBF,

5. (a)15 per cent of the gross amount of the dividends where those dividends are paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 by an investment vehicle which distributes most of this income annually and whose income from such immovable property is exempted from tax;

(b) 10 per cent of the gross amount of the dividends, in all other cases

6. Dividend:

a) Rate of tax shall be 10% on income from Global Depository Receipts under Section 115AC(1)(b)of Income-tax Act, 1961.

b) Rate of tax shall be 20% under Section 115Aon dividend received by a foreign company or a non-resident non-corporate assessee

c) Rate of tax shall be 20% under Section 115ADon dividend received by a Foreign institutional investor.

7. Interest

a) Rate of tax shall be 20% under Section 115Aon interest received by a foreign company or a non-resident non-corporate assessee from Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency.

b) Rate of tax shall be 10% under Section 115ACon income from bonds of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, or on bonds of a public sector company sold by the Government, and purchased by non-resident in foreign currency

c) Rate of tax shall be 5% in following cases:

(i) Interest received from an infrastructure debt fund as referred to in section 10(47)

(ii) Interest received from an Indian company specified in section 194LC.

(iii) Interest of the nature and extent referred to in section 194LD (applicable from the assessment year 2014-15).

(iv) Distributed income being interest referred to in section 194LBA(2) (section 194LBA is inserted by the Finance (No. 2) Act, 2014 w.e.f. 01-10-2014)

The CBDT has clarified that DTAA signed with Government of the Czech Republic on the 27th January 1986 continues to be applicable to the residents of the Slovak Republic. [Notification No. 25, dated 23-03-2015]