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-USA DTAA lets residents of either country avoid being taxed twice on the same income. It caps source-country tax on dividends, interest, royalties and included services, sets tie-breaker rules for dual residents, and lets you claim credit or exemption using a TRC, Form 10F and Form 67.
Overview
The Double Taxation Avoidance Agreement (DTAA) between India and the United States, signed in 1989 and effective in India from assessment year 1992-93, is one of India's most frequently used treaties because of the large Indian diaspora, cross-border IT services and US portfolio investment. It allocates taxing rights between the two countries and, where both may tax, requires the residence country to give relief. In India the treaty operates through the double-tax-relief provisions of the Income-tax Act, 2025, and a taxpayer applies whichever of the treaty or the Act is more beneficial.
Who It Covers (Residence and Scope)
The treaty covers persons who are residents of India or the USA under Article 4. Where an individual is resident in both, a tie-breaker cascade — permanent home, centre of vital interests, habitual abode, then nationality — decides a single residence. A distinctive feature is the US "saving clause", which preserves the US right to tax its citizens and green-card holders on worldwide income regardless of the treaty. Article 2 limits the covered taxes to Indian income tax and US federal income tax; US state taxes are excluded.
Key Articles — Treaty Rate vs Act Rate
| Income type | Treaty Article | Treaty rate (source) | Indian Act rate (indicative) |
|---|---|---|---|
| Dividends (portfolio) | Article 10 | 15% (verify current treaty rate) | 20% for non-residents plus surcharge/cess |
| Interest | Article 11 | 10% / 15% depending on payer | 20% (or lower special rates) |
| Royalties | Article 12 | 15% (10% in some cases; verify) | 20% under the Act |
| Fees for included services | Article 12 | 15%, only if "make available" met | 20% as FTS |
| Capital gains | Article 13 | Taxed per domestic law of each state | Per Act (12.5%/20% etc.) |
| Independent personal services | Article 15 | Source tax if fixed base / 90-day presence | Per Act |
The "fees for included services" article is narrower than the Act's fees-for-technical-services definition: tax applies only where technical knowledge, skill or a process is "made available" so the payer can apply it independently. Routine services fall outside and are not taxed in India.
How to Claim Relief (TRC, Form 10F, Form 67)
A US resident earning Indian income must furnish a Tax Residency Certificate (US Form 6166) and file Form 10F electronically to access reduced treaty rates on withholding. An Indian resident who has paid US federal tax on the same income claims foreign tax credit by filing Form 67 before completing the Indian return, attaching proof of the foreign tax paid. Where the US taxes a citizen resident in India under the saving clause, India gives credit for that US tax.
Worked Example
Suppose an Indian-resident software professional earns ₹8,00,000 of US-sourced consultancy income on which the US withholds ₹1,20,000 (15%). In India the income is again taxable at slab rates, say ₹1,60,000 of Indian tax on that slice. Under the treaty read with Section 159 of the Income-tax Act, 2025, India allows a credit of the lower of the US tax (₹1,20,000) or the Indian tax on the doubly-taxed income (₹1,60,000). The resident therefore pays ₹40,000 net in India after the ₹1,20,000 credit, avoiding double taxation.
Common Points to Watch
Confirm whether a payment genuinely meets the make-available test before treating it as taxable FTS. Remember that US state taxes are not creditable under the treaty and must be handled under domestic relief. Keep the TRC and Form 10F current for each financial year, and file Form 67 on time — a late Form 67 can jeopardise the credit.