DTAA Benefits for Non-Resident Companies Doing Business in India
Doing business in India as a non-resident company involves cross-border taxation, which can result in the same income being taxed in both India and the country of origin. Double Taxation Avoidance Agreements (DTAAs) are treaties that protect international companies from such duplicate taxation and offer tax relief, reduced withholding rates, and better planning opportunities.
At Jain Prachi & Company, we help global businesses leverage DTAA provisions to lawfully reduce their Indian tax liability and maximize cross-border efficiency.
What is a Double Taxation Avoidance Agreement (DTAA)?
A DTAA is a bilateral treaty between India and another country to prevent the same income from being taxed twice:
- Once in the source country (India, in this case)
- Again in the residence country of the foreign taxpayer
India has signed DTAAs with over 90 countries, including the USA, UK, Germany, Singapore, UAE, Australia, Mauritius, and others.
Key Benefits of DTAA for Foreign Businesses in India
- Reduced Withholding Tax Rates
Certain categories of income, such as:
- Royalty
- Interest
- Technical services fees
- Dividend income
are taxed at reduced DTAA rates, often significantly lower than India’s domestic rates (which can be 10–20%).
- Avoidance of Double Tax
DTAAs allow for:
- Exemption Method: Income taxed in one country is exempt in the other
- Credit Method: Tax paid in India is credited against tax payable in the home country
- Permanent Establishment Clarification
The DTAA defines what constitutes a Permanent Establishment (PE) in India, which affects whether business profits are taxable in India at all.
- Protection Against Discrimination
DTAAs prevent India from imposing less favorable tax rules on foreign entities than it would on Indian companies.
Common DTAA Withholding Rates for India
Nature of Income | India’s Domestic Rate | DTAA Rate (Indicative) |
Royalty | 10% to 20% | 10% (varies by country) |
Technical Fees | 10% to 20% | 10–15% |
Interest | 20% | 5–15% |
Dividend | 20% | 5–15% |
Note: Actual rate depends on the country and treaty provisions.
Eligibility to Claim DTAA Benefits in India
To claim the lower DTAA tax rates or exemption, the non-resident taxpayer must:
- Have a Tax Residency Certificate (TRC) from the country of residence
- Submit Form 10F to the Indian tax authorities
- Provide a self-declaration confirming eligibility
All documents must be submitted before or at the time of remittance.
Practical Example
Scenario: A UK-based company provides technical consulting to an Indian firm.
- Without DTAA: 20% TDS on fees paid to the UK firm
- With DTAA (India-UK Treaty): Only 10% TDS applicable
This saves the foreign company 50% on Indian withholding tax.
How Jain Prachi & Company Supports DTAA Planning
- Evaluation of DTAA eligibility and treaty application
- Assistance in obtaining TRC and preparing Form 10F
- Structuring of contracts and invoices to align with DTAA clauses
- Filing of necessary forms (15CA/15CB) for outward remittances
- Representation during tax scrutiny or queries from the Indian tax authorities
Why Global Clients Choose Jain Prachi & Company
- Experience with over 90+ international DTAA treaties
- Proven strategies to minimize tax without legal exposure
- Strong coordination with Indian banks for remittance documentation
- Advisory that aligns tax planning with business objectives
Looking to Minimize Tax with DTAA Benefits in India?
Leverage tax treaties effectively and ensure your cross-border operations remain compliant and efficient.
📧 Email: contactus@jainprachi.com
🌐 Website: https://jainprachi.com
FAQs – DTAA for Foreign Companies in India
Q: Can I automatically claim DTAA benefits?
No. You must submit a TRC, Form 10F, and declaration to the Indian payer.
Q: What if the DTAA rate is higher than Indian law?
You are allowed to apply the lower of the two (as per Section 90 of the Income Tax Act).
Q: Can DTAA help avoid Permanent Establishment risk?
DTAAs define PE thresholds clearly, helping determine when business profits become taxable in India.
