India Tax Treaty

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Facts about India Tax Treaty



India has signed double tax avoidance treaties with almost all the major countries in the world such as the US, China, Japan, Germany, and France. The basic purpose of these tax agreements is to make sure that certain taxes are covered in both the countries that have signed the agreement.

The other basic purposes of the tax treaties signed by India may be enumerated as below:

  • Define the situations in which its citizens will be subjected to taxes in another country on factors like salary, pension, self employment, or any other form of income and vice versa.
  • Reducing the amount of tax that is withheld from the interest, royalties, or dividends paid by the residents of other countries and vice versa.
  • Stating the exemptions in case of both individual and institutional tax payers.
  • Restricting the taxes imposed on the business income of residents of other countries to the income derived from a permanent establishment in India and vice versa.
  • Provide the process related framework for enforcing tax rules and resolving disputes.

Main Purpose of India Tax Treaties

As has been stated above the basic purpose of these treaties is to deal with issues like prevention of financial evasion and avoiding double taxation and covering residents of either one or both the countries.

India Tax Agreements



India Tax Treaty with the US

In the US the India tax treaty with the US will cover the Federal income taxes that are levied by the Internal Revenue Code. In India, the agreement will take care of the income taxes and the necessary surcharges along with the surtax. It was signed on December 18, 1990.

Indian Tax Treaty with China

In China the Indian tax treaty with China is responsible for covering the individual income tax, the local income tax, and the income tax levied on foreign companies or Chinese companies with foreign interests. In India, the agreement is concerned about the income tax and the resulting surcharges. It was signed on November 21, 1994.

India Tax Treaty with Japan

In Japan, the India tax treaty with Japan covers the corporation tax and the income tax. In India this agreement deals with the income tax and the necessary surcharges. India signed the treaty with Japan on December 29, 1989.

Indian Tax Treaty with Germany

The Indian tax treaty with Germany was signed on October 26, 1996. In Germany this treaty accounts for the income tax, the capital tax, the corporation tax, and the trade tax. In India the treaty deals with the income tax and the necessary surcharges.

India Tax Treaty with France

India has signed a double taxation treaty with France to remove the burden of double taxation with regard to taxes in income. The agreement is concerned with the profits arising from the industries or even from commercial transactions of an organization of either India or France, is exempted from the payment of taxes in the other country, but there is an exception to this rule. The exception to the said rule is that in case the mentioned company has already a branch or office in the other country then that company is required to pay taxes for that office or branch of the company.

The India tax treaty with France was signed on August 1, 1994. In India this treaty is concerned with income tax and respective surcharges, the wealth tax, and the surtax. In France the agreement deals with the income tax, the wealth tax, and the corporation tax.

Indian Tax Treaty with Brazil

In Brazil the Indian tax treaty with Brazil is responsible for the federal income tax with the exception of the supplementary income taxes and tax on activities that do not have a lot of importance. In India, the agreement concerns itself with the surtax and the income tax along with necessary surcharges. This treaty was signed in Brasilia on March 11, 1992.

India Tax Treaty with the UK

The India tax treaty with the UK was signed on October 26, 1993. In the United Kingdom the treaty covers the income tax, the capital gains tax, the corporation tax, and petroleum revenue tax. In India this agreement takes care of only the income tax and the related additions.

Indian Tax Treaty with Italy

The Indian tax treaty with Italy was signed on November 23, 1995. In India the treaty deals with the surtax and the income tax along with the necessary surcharges. In Italy the treaty is responsible for the personal income tax, the local income tax, and the corporate income tax.

India Tax Treaty with Russia

The India tax treaty with Russia was signed on April 11, 1998. In Russia the agreement takes care of the income tax imposed on individuals and the taxes levied on profits or income of organizations and enterprises. In India it covers only the income tax and related surcharges.

Indian Tax Treaty with Canada

In Canada the India tax treaty with Canada concerns itself with the Income Tax Act of Canada while in India the agreement covers wealth taxes levied as per the Wealth Tax Act and income taxes that are taken according to the Income Tax Act. The treaty was signed on May 6, 1997.

India Tax Treaty with Australia

In Australia the India tax treaty with Australia covers the resource rent tax that is taken on offshore projects for petroleum resource exploration, and income taxes. The resource rent tax is imposed as per Federal tax laws in Australia. In India the treaty concerns itself with surtax that is levied on taxable profits earned by companies as well as income taxes and other related surcharges. The treaty came to being on December 30, 1991.

Indian Tax Treaty with Spain

The Indian tax treaty with Spain was signed on January 12, 1995. In Spain the agreement accounts for the income tax on individuals, the capital tax, and the corporation tax. In India the treaty covers the surtax, and the income tax with the surcharges.

India Tax Treaty with Mexico

The India tax treaty with Mexico was signed on September 10, 2007 at New Delhi. In India the treaty is responsible for the income taxes and necessary surcharges. In Mexico the agreement deals with the federal income tax.

Indian Tax Treaty with South Korea

The Indian tax treaty with South Korea was signed on August 1, 1986. In South Korea the agreement deals with the income tax, the inhabitant tax, and the corporation tax. In India the agreement takes care of the income taxes and surcharges collected as per the Income Tax Act 1961, and the surtax that is levied according to the Companies (Profits) Surtax Act, 1964.

India Tax Treaty with Bulgaria

The India tax treaty includes the double taxation treaty of India with Bulgaria on merchant shipping in order to establish maritime relations between India and Bulgaria. The agreement serves to develop regular shipping service between India and Bulgaria. Both the countries are allowed to set up general agencies for the respective shipping companies within the each other's territory. Both countries seek to take required measures to stop ships delays, to hasten the formalities related to customs. The most important aspect of the treaty is that the documents of registration and tonnage have to be mutually recognized. All the other double taxation treaties signed by India with the other foreign countries are included within India tax treaty.

India Tax Treaty with Ethiopia

India has signed a double taxation treaty with Ethiopia to nullify the burden of taxes on the incomes of the aircraft operating companies of Ethiopia to pay taxes in India and vice versa. The agreement is also applicable for joint ventures, pool participants in connection with air transport. The amount of interest on funds in relation to the operation of aircraft will be seen as income from the operational activities of the respective aircraft.

India also has similar tax treaties with other countries that may be enumerated as below:

  • Armenia
  • Myanmar
  • Austria
  • Namibia
  • Bangladesh
  • Nepal
  • Belarus
  • Netherlands
  • Belgium
  • New Zealand
  • Botswana
  • Norway
  • Bulgaria
  • Oman
  • Cyprus
  • Philippines
  • Czech Republic
  • Poland
  • Denmark
  • Portugal
  • Egypt
  • Qatar
  • Estonia
  • Romania
  • Finland
  • Saudi Arabia
  • Georgia
  • Serbia
  • Greece
  • Singapore
  • Jordan
  • Slovenia
  • Hungary
  • South Africa
  • Iceland
  • Sri Lanka
  • Indonesia
  • Sudan
  • Ireland
  • Sweden
  • Israel
  • Switzerland
  • Kazakhstan
  • Syria
  • Kenya
  • Tajikistan
  • Kuwait
  • Tanzania
  • Kyrgyzstan
  • Thailand
  • Libya
  • Trinidad and Tobago
  • Lithuania
  • Turkey
  • Luxembourg
  • Turkmenistan
  • Malaysia
  • UAE
  • Malta
  • Uganda
  • Mauritius
  • Ukraine
  • Mongolia
  • Uzbekistan
  • Montenegro
  • Vietnam
  • Morocco
  • Zambia
  • Mozambique

India Tax Treaties under review

The Union Government is presently evaluating the Indian tax treaty with Mauritius so that any form of misappropriation can be stopped and the system of exchanging tax information between the two countries can become stronger. The information was recently provided by the present Union Finance Minister, P Chidambaram, while providing a written reply to the Lok Sabha.

He further stated that a Joint Working Group (JWG), made up of members from the central governments of both the countries had been put together in 2006 for similar purposes. Till now 8 rounds of discussion have taken place. Chidambaram also stated that consistent efforts are being made to find solutions that are acceptable to address the concerns put forward by India.

The present tax treaty between both the countries was signed during 1983. It only taxes capital gains resulting from share alienation in the country where the investor resides. As per the domestic laws in Mauritius capital gains are totally exempted from any taxation. This has made Mauritius a lucrative area of investment.

Last Updated on 12/04/2012
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