Insights · India-UAE Corridor
The India-UAE Tax Treaty (DTAA): Withholding Rates and How Relief Works
Dividend, interest and royalty rates under the India-UAE tax treaty, why technical service fees are treated differently, how capital gains are split, and what you need to claim relief.
The India-UAE Double Taxation Avoidance Agreement caps Indian withholding tax at 10% on dividends, 5% or 12.5% on interest, and 10% on royalties paid to a UAE resident. It has no article on fees for technical services, which changes how service payments are taxed. Signed in 1993 and amended by a protocol in 2007, it is the document that decides whether an India-UAE structure works.
Treaty rates at a glance
- Dividends: 10% of the gross amount
- Interest: 5% where the beneficial owner is a bank or financial institution; 12.5% in other cases
- Royalties: 10%
- Fees for technical services: no separate article
- Capital gains on shares of an Indian company: taxable in India
- Individual residence in the UAE: at least 183 days in the calendar year
The text and protocols are published by the Income Tax Department.
Rates compared with Indian domestic law
| Payment from India to a UAE resident | Domestic rate | Treaty rate |
|---|---|---|
| Dividends | 20% plus surcharge and cess | 10% |
| Interest on a loan from a UAE bank | 20% generally, plus surcharge and cess | 5% |
| Interest on a shareholder or group loan | 20% generally, plus surcharge and cess | 12.5% |
| Royalties | 20% plus surcharge and cess | 10% |
| Fees for technical services | 20% plus surcharge and cess | No article: treated as business profits or professional income |
The payer applies whichever is more favourable to the recipient. Surcharge and cess are not added to a treaty rate. The mechanics of deduction are in section 393: TDS on payments to non-residents.
The missing technical services article
Most Indian treaties let India tax fees for technical services at 10% or 15% even where the foreign provider has no presence here. The UAE treaty does not. Indian tribunals have generally held that such fees paid to a UAE enterprise are business profits, taxable in India only if the enterprise has a permanent establishment here, or professional income of an individual, taxable only with a fixed base or a long stay. The tax department has argued in some cases that the residual other income article applies instead. The position is favourable but not free of dispute, so a payer making large service payments to the UAE should hold a reasoned opinion, the recipient’s tax residency certificate and a no permanent establishment declaration, or obtain a lower deduction certificate.
A service permanent establishment can arise if the UAE enterprise furnishes services in India through employees for more than nine months in any twelve, so long projects need tracking.
Capital gains
- Immovable property: taxable where the property is situated.
- Shares of an Indian company: since the 2007 protocol, India may tax the gain.
- Other property: taxable only in the seller’s country of residence. The Delhi bench of the tribunal held in 2024 that units of Indian mutual funds are not shares, so gains of a UAE resident on them fell under this rule and were not taxable in India. This is tribunal-level authority and depends on genuine UAE treaty residence.
Residency is the gatekeeper
An individual is a UAE resident under the treaty only if present in the UAE for at least 183 days in the calendar year. A company must be incorporated in the UAE and managed and controlled wholly in the UAE. To claim the treaty in India, the recipient needs a UAE tax residency certificate, the prescribed information form filed on the Indian portal, and a PAN. See UAE tax residency certificate for Indians.
Limitation of benefits
Article 29, added in 2007, denies the treaty to an entity if the main purpose, or one of the main purposes, of creating it was to obtain treaty benefits, or if it has no bona fide business activities. Indian domestic law adds the general anti-avoidance rule and the beneficial ownership conditions in the dividend, interest and royalty articles. A UAE company with no staff that receives royalties or interest from India and passes them on is the obvious target.
Relief from double taxation
Both countries use the credit method. An Indian resident with UAE income is taxed in India and claims credit for UAE tax paid on the same income, by filing the foreign tax credit form before the return is due. Since the UAE introduced corporate tax, UAE tax paid by a UAE branch of an Indian company is creditable in India. Tax paid by a separate UAE subsidiary on its own profits is not creditable against the Indian shareholder’s tax on dividends.
Practical checklist for a payer in India
- Identify the nature of the payment and the treaty article that covers it.
- Collect the tax residency certificate for the period, the treaty form and the PAN.
- Confirm the recipient is the beneficial owner and has real activity in the UAE.
- Check days of presence of the recipient’s staff in India.
- Deduct at the correct rate, then file Form 145 and obtain Form 146 where required. See our guide to the new forms.
Related reading: POEM risk for a Dubai company and UAE corporate tax for Indian businesses. Our international taxation team issues treaty opinions and remittance certificates for India-UAE payments.