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Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties

Withholding Taxes for Foreign Companies, India USA Tax Treaty Applicable Rates, Tax Rates for USA Companies Doing Business in India

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Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties

Section 90 of the Indian Income Tax Act authorizes the government of India to enter into Double Tax Avoidance Agreements (tax treaties) with other countries. The object of such agreements is to evolve an equitable basis for the allocation of the right to tax different types of income between the 'source' and 'residence' states ensuring in that process tax neutrality in transactions between residents and non-residents. 

The foreign companies doing business in India should pay careful attention to corporate structuring and proper tax planning before investing in India.

A non-resident, under the scheme of income taxation, becomes liable to tax in India in respect of income arising here by virtue of its being the country of source and then again, in his own country in respect of the same income by virtue of the inclusion of such income in the 'total world income' which is the tax base in the country of residence. Tax incidence, therefore, becomes an important factor influencing the non-residents in deciding about the location of their investment, services, technology etc.

Tax treaties serve the purpose of providing protection to tax payers against double taxation and thus preventing the discouragement which taxation may provide in the free flow of international trade, international investment and international transfer of technology. These treaties also aim at preventing discrimination between the tax payers in the international field and providing a reasonable element of legal and fiscal certainty within a legal framework. In addition, such treaties contain provisions for mutual exchange of information and for reducing litigation by providing for mutual assistance procedure.


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Double Taxation Avoidance Treaties

India has entered into Double Taxation Avoidance Treaties with the following Countries: 

S.No. Name of the Country Effective from Assessment Year
1 Australia 1993-94  
2 Austria 1963-64  
3 Bangladesh 1993-94  
4 Belgium 1989-90; 1999-2000 (Revised)
5 Brazil 1994-95  
6 Belarus 1999-2000  
7 Bulgaria 1997-98  
8 Canada 1987-88; 1999-2000 (Revised)
9 China 1996-97  
10 Cyprus 1994-95  
11 Czechoslovakia 1986-87; 2001-2002 (Revised)
12 Denmark 1991-92  
13 Finland 1985-86; 2000-2001 Amending protocol
14 France 1996-97 (Revised)
15 F.R.G 1958-59 (Original)
  F.R.G. 1984-85 (Protocol)
  D.G.R. 1985-86  
  F.R.G. 1998-99 (Revised)
16 Greece 1964-65  
17 Hungary 1989-90  
18 Indonesia 1989-90  
19 Israel 1995-96  
20 Italy 1997-98 (Revised)
21 Japan 1991-92 (Revised)
22 Jordan 2001-2002  
23 Kazakhstan 1999-2000  
24 Kenya 1985-86  
25 Libya 1983-84  
26 Malta 1997-98  
27 Malaysia 1973-74  
28 Mauritius 1983-84  
29 Mongolia 1995-96  
30 Namibia 2000-2001  
31 Nepal 1990-91  
32 Netherlands 1990-91  
33 New Zealand 1988-89 (1999-2000 amending notification)
(2001-2002 Supp. Protocal)
34 Norway 1988-89  
35 Oman 1999-2000  
36 Philippines 1996-97  
37 Poland 1991-92  
38 Qatar 2001-2002  
39 Romania 1989-90  
40 Singapore 1995-96  
41 South Africa 1999-2000  
42 South Korea 1985-86  
43 Spain 1997-98  
44 Sri Lanka 1981-82  
45 Sweden 1990-91; 1999-2000 (Revised)
46 Switzerland 1996-97  
47 Syria 1983-84  
48 Tanzania 1983-84  
49 Thailand 1988-89  
50 Trinidad & Tobago 2001-2002  
51 Turkmenistan 1999-2000  
52 Turkey 1995-96  
53 U.A.E. 1995-96  
54 U.A.R. 1970-71  
55 U.K. 1995-96 (Revised)
56 U.S.A. 1992-93  
57 Russian Federation 2000-2001  
58 Uzbekistan 1994-95  
59 Vietnam 1997-98  
60 Zambia 1979-80  


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