Tax Treaty (DTAA) Advisory

When income crosses a border, two countries may both claim the right to tax it. Double taxation avoidance agreements (DTAAs) settle which country taxes what, and at what rate. Applied correctly, a treaty removes double tax and often lowers withholding tax. Applied loosely, it leads to disallowed claims, interest and disputes. We help individuals and businesses read the treaty that applies to them and use it properly.

What a tax treaty does

A DTAA is an agreement between two countries that allocates taxing rights over income flowing between them. Treaties exist to:

• stop the same income being taxed twice in two countries;
• reduce tax evasion through cooperation and exchange of information;
• remove tax barriers to trade, investment and the movement of people.

India has comprehensive agreements with around 90 countries. Under section 90 of the Income-tax Act, a taxpayer may apply either the Act or the treaty, whichever is more beneficial.

Treaty provisions that matter most

• Residence and tie-breaker rules: which country you are resident in for treaty purposes, when both countries treat you as resident.
• Permanent establishment: when a foreign business has a taxable presence in the other country.
• Classification of income: business profits, dividends, interest, royalties, fees for technical services, capital gains and salaries are each dealt with differently.
• Reduced rates: lower withholding rates on dividends, interest, royalties and technical fees.
• Elimination of double tax: exemption or credit methods.
• Mutual agreement procedure (MAP): a route for the two tax authorities to resolve disputes.
• Exchange of information: sharing of taxpayer information between authorities.
• Anti-abuse rules: limitation of benefits clauses, the principal purpose test introduced through the multilateral instrument (MLI), and India's general anti-avoidance rules.

Our treaty advisory services

Interpreting and applying the treaty

• Working out which country has the right to tax each stream of income
• Determining treaty residence, including tie-breaker tests
• Identifying income that may be exempt or taxed at a lower rate, such as certain capital gains, royalties and fees for technical services
• Considering the effect of the MLI, protocols and most-favoured-nation clauses on the treaty you rely on

Eliminating double taxation

• Structuring payments and contracts so treaty relief is available
• Claiming foreign tax credit in India, including filing Form 67 on time
• Preparing the forms and documents each claim needs

Permanent establishment review

• Testing fixed place, service, agency and construction PE thresholds against your activities in India
• Reviewing contracts and employee travel to avoid an unintended PE
• Identifying exceptions available for preparatory or auxiliary activities

Withholding tax

• Determining the correct rate under the Act and the treaty for payments to non-residents
• Issuing Form 15CB and supporting Form 15CA filings
• Applying for lower or nil withholding certificates
• Claiming refunds where too much tax was withheld

Tax residency certificates

• Obtaining an Indian TRC (Form 10FA / 10FB) for residents claiming relief abroad
• Checking foreign TRCs and preparing Form 10F for non-residents claiming relief in India
• Planning renewals so certificates cover each year of payments

Structuring cross-border transactions

• Reviewing investment, holding and operating structures for India entry or overseas expansion
• Testing structures against anti-abuse rules so treaty benefits hold up
• Planning repatriation of profits as dividends, interest, royalties or capital

Treaty disputes

• Representing you in assessments and appeals where treaty claims are denied
• Preparing and pursuing mutual agreement procedure (MAP) applications
• Support with advance pricing agreements where transfer pricing is involved

Getting the most from a treaty

• Review your facts against the treaty before the transaction, not after the tax is withheld
• Keep the TRC, Form 10F and beneficial ownership evidence ready for each year
• Re-check positions when treaties are amended or protocols come into force
• Make sure the position taken in India matches the one taken in the other country

Common questions

Is treaty relief automatic?

No. The non-resident must hold a tax residency certificate and provide Form 10F, and the payer or tax officer must be satisfied that the conditions of the treaty are met.

Can I choose between the Act and the treaty?

Yes. Under section 90(2) you may apply whichever is more beneficial, subject to the general anti-avoidance rules.

What is a permanent establishment and why does it matter?

It is a taxable presence of a foreign business in India, such as an office, a project site or an agent concluding contracts. If one exists, India can tax the profits attributable to it at the rates for foreign companies.

What can I do if both countries tax the same income?

Claim credit in your country of residence, and where the dispute is about the treaty itself, apply for the mutual agreement procedure alongside or instead of domestic appeals.

Section and form numbers on this page refer to the Income-tax Act, 1961 and its rules. From 1 April 2026 the Income-tax Act, 2025 applies, with new section and form numbers; the requirements described here are broadly unchanged. We use whichever numbering applies to your transaction date.