India rules · all investors
Tax Treaty: India rules for foreign companies
CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375
A treaty rate applies only if the recipient is resident in the treaty country, is the beneficial owner of the income and can prove both. The Indian payer withholds at the treaty rate only on the strength of the residency certificate and Form 41 supplied before payment.
Using the treaty correctly
A treaty rate applies only if the recipient is resident in the treaty country, is the beneficial owner of the income and can prove both. The Indian payer withholds at the treaty rate only on the strength of the residency certificate and Form 41 supplied before payment.
Since 2025, India's General Anti-Avoidance Rule and the principal purpose test introduced by the multilateral instrument allow treaty benefits to be denied where obtaining them was a main purpose of an arrangement. Substance in the treaty country is therefore part of the claim.
Where a treaty and domestic law differ, the more beneficial applies to the taxpayer. Treaty rates are on the gross amount; the recipient usually claims a credit for the Indian tax in its home country.
Checklist
- Current tax residency certificate
- Form 41 completed
- Beneficial ownership supported by substance
- Correct article identified for each payment
- Forms 145 and 146 for remittances
Common mistakes
- Residency certificates that do not cover the payment date
- Assuming every service fee is taxable at the technical-fee rate
- No evidence of beneficial ownership
- Withholding at the treaty rate without Form 41
How this applies to your country
- USA to India en-US
- UK to India en-GB
- Japan to India en-JP
- Germany to India en-DE
- Singapore to India en-SG
- Australia to India en-AU
- China to India en-CN
- Hong Kong to India en-HK
- Russia to India en-RU
- Spain to India en-ES
- France to India en-FR
- UAE to India en-AE
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Questions
What is Form 41?
The form, formerly Form 10F, in which a non-resident gives the particulars needed to claim treaty benefits, alongside the residency certificate.
Are treaty rates applied automatically?
No. The payer applies them only on receiving valid documents; otherwise domestic rates apply.
Does the treaty always beat Indian domestic rates?
The lower of the treaty and domestic rate applies, provided the recipient is the beneficial owner and holds a valid residency certificate.
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