Indian Income Tax Act 1961 makes it mandatory for all Indian companies and individuals to Withholding Tax Rates in India on all income earned by Foreign Companies / NRI from the Indian sources. With this law, the company has to inform the government on a quarterly basis about income and the amount of withheld tax. If the company fails to inform the government about the withholding tax then it will be assessed compulsorily and the levied fine will be paid by the company.
List of DTAA – Withholding Tax Rates in India (TDS for Foreign Companies)
| Country | Dividend | Interest | Royalty | Fee for Technical Services |
| Albania | 10% | 10%[Note1] | 10% | 10% |
| Armenia | 10% | 10% [Note1] | 10% | 10% |
| Australia | 15% | 15% | 10%/15%[Note 2] | 10%/15%[Note 2] |
| Austria | 10% | 10% [Note1] | 10% | 10% |
| Bangladesh | a) 10% (if at least 10% of the capital of the company paying the dividend is held by the recipient company);b) 15% in all other cases | 10% [Note1] | 10% | No separate provision |
| Belarus | a) 10%, if paid to a company holding 25% shares;b) 15%, in all other cases | 10% [Note1] | 15% | 15% |
| Belgium | 15% | 15% (10% if loan is granted by a bank) | 10% | 10% |
| Bhutan | 10% | 10% [Note 1] | 10% | 10% |
| Botswana | a) 7.5%, if shareholder is a company and holds at least 25% shares in the investee-company;b) 10%, in all other cases | 10% [Note1] | 10% | 10% |
| Brazil | 15% | 15% [Note1] | a) 25% for use of trademark;b) 15% for others | No separate provision |
| Bulgaria | 15% | 15% [Note1] | a) 15% of royalty relating to literary, artistic, scientific works other than films or tapes used for radio or television broadcasting;b) 20%, in other cases | 20% |
| Canada | a) 15%, if at least 10% of the voting powers in the company, paying the dividends, is controlled by the recipient company;b) 25%, in other cases | 15% [Note1] | 15%-20% | 15%-20% |
| China | 10% | 10% [Note1] | 10% | 10% |
| Columbia | 5% | 10% [Note1] | 10% | 10% |
| Croatia | a) 5% (if at least 10% of the capital of the company paying the dividend is held by the recipient company);b) 15% in all other cases | 10% [Note1] | 10% | 10% |
| Cyprus | 10% | 10% [Note1] | 10% | 10% |
| Czech Republic [Note5] | 10% | 10% [Note1] | 10% | 10% |
| Denmark | a) 15%, if at least 25% of the shares of the company paying the dividend is held by the recipient company;b) 25%, in other cases | a) 10% if loan is granted by bank;b) 15% for others [Note1] | 20% | 20% |
| Estonia | 10% | 10% [Note1] | 10% | 10% |
| Ethiopia | 7.5% | 10% [Note1] | 10% | 10% |
| Finland | 10% | 10% [Note1] | 10% | 10% |
| Fiji | 5% | 10% [Note 1] | 10% | 10% |
| France | 10% | 10% [Note1] | 10% | 10% |
| Georgia | 10% | 10% [Note1] | 10% | 10% |
| Germany | 10% | 10% [Note1] | 10% | 10% |
| Hongkong | 5% | 10% [Note1] | 10% | 10% |
| Hungary | 10% | 10% [Note1] | 10% | 10% |
| Indonesia | 10% | 10% [Note1] | 10% | 10% |
| Iceland | 10% | 10% [Note1] | 10% | 10% |
| Ireland | 10% | 10% [Note1] | 10% | 10% |
| Israel | 10% | 10% [Note1] | 10% | 10% |
| Italy | a) 15% if at least 10% of the shares of the company paying dividend is beneficially owned by the recipient company;b) 25% in other cases | 15% [Note1] | 20% | 20% |
| Japan | 10% | 10% [Note1] | 10% | 10% |
| Jordan | 10% | 10% [Note1] | 20% | 20% |
| Kazakhstan | 10% | 10% [Note1] | 10% | 10% |
| Kenya | 10% | 10% | 10% | 10% |
| Korea | 15% | 10% | 10% | 10% |
| Kuwait | 10% [Note 1] | 10% | 10% | 10% |
| Kyrgyz Republic | 10% | 10% [Note1] | 15% | 15% |
| Latvia | 10% | 10% [Note1] | 10% | 10% |
| Lithuania | 5%*, 15% | 10% [Note1] | 10% | 10% |
| Luxembourg | 10% | 10% [Note1] | 10% | 10% |
| Malaysia | 5% | 10% [Note1] | 10% | 10% |
| Malta | 10% | 10% [Note1] | 10% | 10% |
| Mongolia | 15% | 15% [Note1] | 15% | 15% |
| Mauritius | a) 5%, if at least 10% of the capital of the company paying the dividend is held by the recipient company;b) 15%, in other cases | 7.5 | 15% | 10% |
| Montenegro | 5% (in some cases 15%) | 10% [Note1] | 10% | 10% |
| Myanmar | 5% | 10% [Note1] | 10% | No separate provision |
| Morocco | 10% | 10% [Note1] | 10% | 10% |
| Mozambique | 7.5% | 10% [Note1] | 10% | No separate provision |
| Macedonia | 10% | 10% [Note 1] | 10% | 10% |
| Namibia | 10% | 10% [Note1] | 10% | 10% |
| Nepal | 5%**, 10% | 10% [Note1] | 15% | No separate provision |
| Netherlands | 10% | 10% [Note1] | 10% | 10% |
| New Zealand | 15% | 10% [Note1] | 10% | 10% |
| Norway | 10% | 10% [Note1] | 10% | 10% |
| Oman | a) 10%, if at least 10% of shares are held by the recipient company;b) 12.5%, in other cases | 10% [Note1] | 15% | 15% |
| Philippines | a) 15%, if at least 10% of the shares of the company paying the dividend is held by the recipient company;b) 20%, in other cases | a) 10%, if interest is received by a financial institution or insurance company;b) 15% in other cases[Note1] | 15% if it is payable in pursuance of any collaboration agreement approved by the Government of India | No separate provision |
| Poland | 10% | 10% [Note1] | 15% | 15% |
| Portuguese Republic | 10%***/15% | 10% | 10% | 10% |
| Qatar | a) 5%, if at least 10% of the shares of the company paying the dividend is held by the recipient company;b) 10%, in other cases | 10% [Note1] | 10% | 10% |
| Romania | 10% | 10% [Note1] | 10% | 10% |
| Russian Federation | 10% | 10% [Note1] | 10% | 10% |
| Saudi Arabia | 5% | 10% [Note1] | 10% | No separate provision |
| Serbia | a) 5%, if recipient is company and holds 25% shares;b) 15%, in any other case | 10% [Note1] | 10% | 10% |
| Singapore | a) 10%, if at least 25% of the shares of the company paying the dividend is held by the recipient company;b) 15%, in other cases | a) 10%, if loan is granted by a bank or similar institute including an insurance company;b) 15%, in all other cases | 10% | 10% |
| Slovenia | a) 5%, if at least 10% of the shares of the company paying the dividend is held by the recipient company;b) 15%, in other cases | 10% | 10% | 10% |
| South Africa | 10% | 10% [Note1] | 10% | 10% |
| Spain | 15% | 15% [Note1] | 10%/20%[Note 3] | 20%[Note 3] |
| Sri Lanka | 7.5% | 10% [Note1] | 10% | 10% |
| Sudan | 10% | 10%[Note1] | 10% | 10% |
| Sweden | 10% | 10% [Note1] | 10% | 10% |
| Swiss Confederation | 10% | 10%[Note1] | 10% | 10% |
| Syrian Arab Republic | a) 5%, if at least 10% of the shares of the company paying the dividend is held by the recipient company;b) 10%, in other cases | 10%[Note1] | 10% | No separate provision |
| Tajikistan | a) 5%, if at least 25% of the shares of the company paying the dividend is held by the recipient company;b) 10%, in other cases | 10%[Note1] | 10% | No separate provision |
| Tanzania | 5%****, 10% | 10% | 10% | No separate provision |
| Thailand | 10% | 10% [Note1] | 10% | No separate provision |
| Trinidad and Tobago | 10% | 10% [Note1] | 10% | 10% |
| Turkey | 15% | a) 10% if loan is granted by a bank, etc.;b) 15% in other cases[Note1] | 15% | 15% |
| Turkmenistan | 10% | 10% [Note1] | 10% | 10% |
| Uganda | 10% | 10%[Note1] | 10% | 10% |
| Ukraine | a) 10%, if at least 25% of the shares of the company paying the dividend is held by the recipient company;b) 15%, in other cases | 10% [Note1] | 10% | 10% |
| United Arab Emirates | 10% | a) 5% if loan is granted by a bank/similar financial institute;b) 12.5%, in other cases | 10% | No separate provision |
| United Mexican States | 10% | 10% [Note1] | 10% | 10% |
| United Kingdom | 15%/10%(Note 4) | a) 10%, if interest is paid to a bank;b) 15%, in other cases[Note1] | 10%/15%[Note 2] | 10%/15%[Note 2] |
| United States | a) 15%, if at least 10% of the voting stock of the company paying the dividend is held by the recipient company;b) 25% in other cases | a) 10% if loan is granted by a bank/similar institute including insurance company;b) 15% for others | 10%/15%[Note 2] | 10%/15%[Note 2] |
| Uruguay | 5% | 10% [Note1] | 10% | 10% |
| Uzbekistan | 10% | 10% [Note1] | 10% | 10% |
| Vietnam | 10% | 10% [Note1] | 10% | 10% |
| Zambia | a) 5%, if at least 25% of the shares of the company paying the dividend is held by a recipient company for a period of at least 6 months prior to the date of payment of the dividend;b) 15% in other cases | 10% [Note1] | 10% | 10% |
*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 (subject to certain condition).
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. (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
5. 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]
[As amended by Finance Act, 2020] Taken from Income Tax Website on 27th Apr 2021
DTAA Withholding Tax Rates in India
Recently there has been a lot of discussion about the Indian Income Tax Act and its treatment of foreign corporations. The Indian Income Tax Act, like the United States IRS code, is a complicated statute that is very difficult to understand. There have been many instances of Foreign companies being subjected to double taxation due to unclear provisions in their own domestic laws. In cases like these, the Government was forced to negotiate special treatment with foreign corporations in order to reinstate the withholding tax levied against their profits earned from India.
This double taxation is generally levied on multinational companies operating in India, as Indian law does not provide suitable definitions to impose taxes on foreign affiliates. To avoid this kind of unnecessary harassment, and to encourage multinationals to conduct business in India legitimately, the Indian government and American authorities came up with a DTAA. This Memorandum provides companies with several attractive incentives. For instance, it provides companies with an opportunity to settle their taxes in India at a lower rate. Also, if a company is unable to settle its taxes in India due to lack of funds, it will be provided additional assistance by the Government in terms of providing a refund to its shareholders.
As a result of the Indian Income Tax Memorandum, foreign companies operating in India are able to save on the burden of paying both internal and external taxes. The tax considerations which the Indian authorities to take into account while providing incentives to foreign firms operating in India are quite sensible and practical. It also highlights the need for multinationals to conduct business through India. In other words, the Indian authorities realize that they cannot collect the same tax amount from companies abroad which they could collect in the US, and so they are offering substantial incentives to bring business back to their home country.
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