DTAA Between India explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The India–Japan DTAA caps source-state tax on dividends, interest, royalties and fees for technical services at 10%, defines permanent establishment for taxing business profits, and lets residents eliminate double taxation through the credit method using a TRC, Form 10F and Form 67.
Overview
India and Japan share a deep investment relationship, and the Double Taxation Avoidance Agreement between them is one of India's most frequently invoked treaties. It allocates taxing rights, provides reduced withholding rates, and gives certainty on how business profits, royalties and technical fees are taxed. Relief in India is administered through Sections 90 and 91 of the Income-tax Act 2025.
Who It Covers
The treaty applies to residents of India or Japan as defined in Article 4. Company residence depends on incorporation and place of effective management; individual residence is resolved by the tie-breaker tests. Only a treaty resident holding a valid Tax Residency Certificate can claim benefits in India, per Section 90(4).
Key Articles and Rates
| Income type | Treaty article | Treaty rate | Domestic Act rate (indicative) |
|---|---|---|---|
| Dividends | Article 10 | 10% of gross | 20% + surcharge/cess |
| Interest | Article 11 | 10% of gross | 20% (5% concessional cases) |
| Royalties | Article 12 | 10% of gross | 20% |
| Fees for technical services | Article 12 | 10% of gross | 20% |
| Business profits | Article 7 | Only if PE exists | 40% (foreign company) |
Rates are indicative of the current treaty; verify against the latest notified text. Under Section 90(2) the taxpayer may elect whichever of the Act or the treaty is more beneficial.
Permanent Establishment
Article 5 defines a PE as a fixed place of business — office, branch, factory, workshop — and includes building sites and installation projects continuing beyond the treaty's threshold, plus dependent-agent PEs. Under Article 7, only profits attributable to the PE are taxed in the source state. A Japanese enterprise merely selling into India without a PE is not liable to Indian tax on those business profits.
How to Claim Relief
An Indian resident with Japanese-source income that has borne Japanese tax claims a foreign tax credit under Rule 128: obtain the TRC, file Form 10F, keep proof of foreign tax paid, and file Form 67 on or before the return due date. India then allows credit for Japanese tax against Indian tax on the same income, capped at the Indian tax attributable to that income. For a Japanese resident earning Indian income, the Indian payer applies the 10% treaty rate at source once the TRC and Form 10F are furnished.
Worked Example
An Indian company pays ₹1,00,00,000 as royalty to a Japanese licensor. Instead of withholding 20% (₹20,00,000) under the Act, it applies the Article 12 treaty rate of 10% (₹10,00,000) after collecting the licensor's TRC and Form 10F. The Japanese company then credits this ₹10,00,000 against its Japanese tax, eliminating double taxation.