India Australia DTAA for Companies with Rates, 2022 Change and ECTA

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

The India Australia DTAA caps Indian tax at 15 percent on dividends (Article 10) and interest (Article 11) paid to an Australian beneficial owner. Royalties bear 10 percent for equipment hire and 15 percent for other royalties and make available technical services (Article 12). Management fees outside Article 12 are taxed in India only through a PE. For income years starting on or after 29 Dec 2022, Australia no longer taxes Indian firms' offshore technical services under Article 12(3)(g).

This page is for Australian parent companies and the finance teams of their Indian subsidiaries. It covers the rates, the Income Tax Act, 2025 comparison, the royalty bands and PE. It also covers capital gains, the MLI, the ECTA tax change and a worked example. Rupee amounts use Indian grouping, so INR 1,00,00,000 is one crore.

What is the India Australia DTAA?

The India Australia DTAA is the income tax agreement signed at Canberra on 25 Jul 1991. It entered into force on 30 Dec 1991, and India notified it by GSR 60(E) of 22 Jan 1992. In India it has effect for income of years beginning on or after 1 Apr 1992. It decides which country may tax an Australian company's Indian income and caps India's rate on dividends, interest and royalties.

A protocol signed at New Delhi on 16 Dec 2011 amended it. The protocol entered into force on 2 Apr 2013, and India notified it by Notification No. 74/2013 of 20 Sep 2013. It made five changes:

1. Article 3(1)(k). It added a definition of "national".
2. Article 5(3). It rewrote the services, natural resources and equipment PE rules.
3. Article 7(1). It restated the business profits rule.
4. Article 24A. It added a non discrimination article.
5. Articles 26 and 26A. It replaced exchange of information and added assistance in collecting taxes.

The treaty page on incometaxindia.gov.in lists no notification after Notification No. 74/2013, when we checked it on 23 Oct 2026. The MLI then modified the treaty from 1 Apr 2020 on the Indian side.

Article 2 covers Indian income tax "including any surcharge thereon" and the surtax on company profits. From 1 Apr 2026, section 159 of the Income Tax Act, 2025 gives effect to the treaty. It replaced section 90 of the 1961 Act. Under section 159(4) the Act applies only where it is more beneficial to the taxpayer. Section 159(6) still lets the General Anti Avoidance Rule (GAAR) override the treaty.

What withholding rates apply under the India Australia DTAA?

India may tax dividends and interest paid to an Australian beneficial owner at up to 15 percent of the gross amount. Royalties bear 10 percent where they are for equipment hire and 15 percent in other cases. Neither the dividend nor the interest article sets a holding threshold or an exemption for government lenders.

Income from India	Australia treaty article	Treaty cap (%)	Condition	Domestic rate for a foreign company, tax year 2026-27, before surcharge and cess (%)	Domestic effective rate in the 2% surcharge slab (%)
Dividends	10(2)	15	Beneficial owner; any size of holding	20, section 207(1)	21.216
Interest from a parent or any other lender	11(2)	15	Beneficial owner	20 on foreign currency loans; 35 on rupee loans	21.216; 37.128
Royalties for the use of industrial, commercial or scientific equipment	12(2)(a), 12(3)(b)	10	Beneficial owner	20, section 207(2)	21.216
Services ancillary to that equipment, and forbearance on it	12(2)(a), 12(3)(d), (f)	10	Beneficial owner	20, section 207(2)	21.216
Other royalties: copyright, patents, trade marks, designs, know how, films	12(2)(b), 12(3)(a), (c), (e)	15	Beneficial owner	20, section 207(2)	21.216
Technical or consultancy services ancillary to other royalties, or that make available know how	12(2)(b), 12(3)(d), (g)	15	Beneficial owner	20, section 207(2)	21.216
Managerial and other services outside Article 12	7	Nil without a PE	No PE in India	20, section 207(2), where section 9(7) applies	21.216
Gains on shares of an Indian company	13(5)	No cap	Indian law applies	12.5 long term; 35 short term (unlisted)	13.26; 37.128

Sources: India Australia DTAA as amended by Notification No. 74/2013; sections 197 and 207 of the Income Tax Act, 2025; Finance Act, 2026, First Schedule.

The Indian payer deducts tax under section 393(2), Table serial 17, at the "rates in force". That is the Finance Act rate or the treaty rate, as applicable. A payer that holds the treaty documents deducts at the lower treaty rate. Our guide to TDS on payments to non residents covers the mechanics.

Domestic rate against treaty rate

The Income Tax Act, 2025 taxes dividends, foreign currency interest, royalties and technical fees of a foreign company at 20 percent under section 207. Surcharge and 4 percent cess come on top. A foreign company's surcharge is 2 percent where payments to it exceed INR 1,00,00,000 in the year. It is 5 percent above INR 10,00,00,000.

The Australia treaty saves less than the India Japan treaty or the Germany treaty, which cap these items at 10 percent. A 15 percent cap against a 21.216 percent effective domestic rate saves about 6 points. On rupee interest the saving is larger, at 15 percent against 37.128 percent in the 2 percent slab.

We apply the treaty rate flat, without surcharge or cess. Article 2 names Indian income tax "including any surcharge thereon" as a covered tax. Tribunal rulings treat cess the same way, but no CBDT circular settles the point. So Form 146 should state the article and the flat rate.

Each cap has a PE carve out. Articles 10(4), 11(4) and 12(4) remove the cap where the holding, debt or right is effectively connected with an Indian PE. Article 12(6) limits the royalty cap to an arm's length amount where a special relationship inflates the payment.

Our guide to the India France DTAA sets out the French caps on the same payments and its most favoured nation clause.

How does the royalty article treat technical services?

The Australia treaty has no separate article for fees for technical services. Article 12(3) folds services into the definition of royalties. Sub paragraph (d) covers technical or consultancy services ancillary to a licence or equipment hire. Sub paragraph (g) covers services that make available technical knowledge, experience, skill, know how or processes, or develop and transfer a technical plan or design.

Article 12(2) then splits the rate. The 10 percent cap covers equipment royalties under 12(3)(b) and services under 12(3)(d) and (f) that relate to that equipment. Every other royalty bears 15 percent. The treaty set 15 or 20 percent for the first five years of income, and 15 percent for later years. The first five years ran out long ago, so 15 percent applies now.

The definition excludes payments for several services, even if they would fall in (d) or (g):

1. Services ancillary to a sale of property.
2. Services ancillary to the rental of ships, aircraft or containers used in international traffic.
3. Teaching in or by educational institutions.
4. Services for the personal use of the individual paying for them.
5. Payments to employees, or to individuals for professional services under Article 14.

Service or payment from an Australian parent to its Indian company	Article 12 result, on our reading	Indian tax without a PE (%)	What we keep on file
Hire of testing or mining equipment, with operator support	Equipment royalty, 12(3)(b) and (d)	10	Hire agreement; asset list
Licence of a trade mark, software or know how	Royalty, 12(3)(a) or (c)	15	Licence agreement; royalty base
Training that lets Indian engineers run a process alone	Make available service, 12(3)(g)	15	Training plan and sign off
Design and handover of a technical plan	12(3)(g)	15	The deliverable
Group finance, HR and legal support	Usually outside 12(3)(g); business profits under Article 7	Nil	Service logs; staff days in India
Group IT helpdesk run from Australia	Usually outside 12(3)(g)	Nil	Tickets and service levels
Salary of an Australian employee seconded to India	Article 15, not Article 12	Taxed as salary	Secondment letter; payroll records

Indian domestic law is wider. Section 9(7) of the Income Tax Act, 2025 covers "managerial, technical or consultancy services". Section 159(4) lets the Australian company use the narrower treaty test. On our reading, a purely managerial fee that makes nothing available falls outside Article 12. It is business profit under Article 7, taxable in India only through a PE.

A fee outside Article 12 still goes on Form 145, with a written treaty analysis on file. Our Form 145 and 146 guide explains which part applies.

On software, the Supreme Court ruled in Engineering Analysis Centre of Excellence Private Limited on 2 Mar 2021. It held that end user software licences are not royalty under India's treaties. Section 9(6) of the 2025 Act still treats software as royalty at home. So the certificate of residency and Form 41 decide the result for an Australian software vendor.

What did the 2022 change for offshore technical services do?

Section 11J of Australia's International Tax Agreements Act 1953 stops the India treaty from subjecting certain service fees to Australian tax. It covers payments to the extent they pay for services in Article 12(3)(g). The payments must not be royalties under Australia's Income Tax Assessment Act 1936. They must also be payments that would not be taxed apart from Article 12(3)(g) and Article 23. It applies to income years starting on or after 29 Dec 2022.

The change matters in the opposite direction from the rest of this page. It protects Indian companies that sell services to Australia, including Indian subsidiaries that run offshore centres for their Australian parent. Before it, Australia could read Article 12(3)(g) with the Article 23 source rule to tax fees for services performed wholly in India.

Date	Event	Instrument
25 Jul 1991	Treaty signed, with services that make available know how inside the royalty article	India Australia DTAA, Article 12(3)(g)
2 Apr 2022	ECTA signed virtually	Australia India ECTA
23 Nov 2022	Act No. 60 of 2022, the Treasury Laws Amendment Act implementing ECTA, appears on the Federal Register of Legislation	Act No. 60 of 2022, Schedule 1, item 3
29 Dec 2022	ECTA enters into force	DFAT
Income years starting on or after 29 Dec 2022	Section 11J applies to assessments	International Tax Agreements Act 1953, section 11J

Sources: ATO Legal Database, section 11J of the International Tax Agreements Act 1953 and its history note; Federal Register of Legislation, Act No. 60 of 2022; DFAT ECTA page; Australian Border Force ECTA page.

Three points help readers apply it:

1. It is Australian law, not a treaty amendment. The treaty text on incometaxindia.gov.in did not change. India still applies Article 12(3)(g) to payments from India to Australia.
2. It is narrow. Its note says payments can still be taxed under other articles, such as Article 7 through a PE in Australia. A payment that is a royalty under Australian domestic law also stays outside it.
3. The start date depends on the income year. For a 1 July income year, the first year starting on or after 29 Dec 2022 is the year from 1 Jul 2023. Ask the Australian adviser which income year applies to the Indian company.

For an Indian subsidiary, the result is simpler books. Where Australia no longer withholds on the fee, the Indian company has no Australian tax to claim as credit in Form 44 (old Form 67). Our guide to Form 67 and foreign tax credit covers the claim where Australian tax still applies.

What ECTA itself does

ECTA is a trade agreement. The DFAT page describes tariff outcomes and says negotiations on a Comprehensive Economic Cooperation Agreement (CECA) have resumed. It does not change the DTAA. The tax outcome for offshore services came through section 11J, in an Act passed to implement ECTA. A CECA could cover further ground, but nothing in it is law today.

When does an Australian company have a PE in India?

An Australian company has a permanent establishment (PE) in India if it has a fixed place of business here. A building or construction project lasting more than six months also counts. So do services through employees for more than 183 days in any 12 months, and substantial equipment operated for more than 183 days. A dependent agent creates one too, for example by habitually concluding contracts or securing orders for the company.

PE trigger	Article	Threshold	Typical risk for an Australian parent
Fixed place of business: office, branch, factory, workshop, mine, sales outlet	5(1), 5(2)	No day count in the text	Parent staff using an Indian office as their own
Building site, construction, installation or assembly project	5(2)(k), with MLI Article 14	More than six months; connected activities over 30 days are added	Plant or site work for an Indian customer
Services, including consultancy, through employees or other personnel	5(3)(a)	More than 183 days in any 12 month period, for the same or a connected project	Australian consultants delivering a long project in India
Activities in exploring for or exploiting natural resources	5(3)(b)	More than 90 days in any 12 month period	Mining and energy services
Operating substantial equipment	5(3)(c)	More than 183 days in any 12 month period	Mining or drilling equipment run in India
Dependent agent with authority to conclude contracts	5(5)(a)	Habitually exercises the authority	Indian staff signing contracts for the parent
Dependent agent who delivers goods from a stock, or habitually secures orders	5(5)(b), 5(5)(c)	Regular deliveries; orders secured wholly or mainly for the enterprise or its group	An Indian group company booking orders for the parent
Dependent agent who manufactures or processes goods for the enterprise	5(5)(d)	Goods belonging to the enterprise	Contract manufacturing in India for the parent
Preparatory or auxiliary activity	5(4), with MLI Article 13 option A and 13(4)	Each activity must be preparatory or auxiliary; group activities are combined	Liaison or purchasing office
Subsidiary	5(7)	Control alone is not a PE	Holds while the subsidiary acts for itself

Sources: India Australia DTAA, Article 5 as amended by Notification No. 74/2013; MLI synthesised text for the India Australia agreement.

The 183 day services rule

Article 5(3)(a) is the rule that matters most for Australian service groups. Australian staff create a PE if they furnish services in India for more than 183 days in any 12 months. The days must relate to the same or a connected project. On our reading, the test counts the days on which the project activities continue, not each person's days. The threshold is longer than the 90 days in the India UK treaty.

A management fee outside Article 12 is untaxed in India until that threshold is crossed. Past it, India taxes the profit attributable to the PE at 35 percent, plus surcharge and cess, through a return. Our guide on how to avoid permanent establishment risk covers the controls, including day logs.

What the MLI did and did not change in Article 5

The MLI applies MLI Article 13 option A and the anti fragmentation rule in Article 13(4) to the Australia treaty. It applies MLI Article 14 on splitting up contracts, with its 30 day test for connected activities. It does not apply MLI Article 12. So the dependent agent rule in Article 5(5) keeps its 1991 wording. That wording is already wide. It covers authority to conclude contracts. It also covers an agent who delivers goods from a stock or habitually secures orders mainly for the enterprise or its group. So does an agent who manufactures or processes goods for it.

How are capital gains taxed under the India Australia DTAA?

Article 13(5) lets India tax gains on shares of an Indian company, with no holding threshold. Article 13(4) adds a rule for shares in companies whose assets consist mainly of Indian real property. Article 13(6) keeps each country's domestic capital gains law for any other property. So the Australia treaty gives a seller less protection than most of India's treaties.

Asset sold by an Australian company	Treaty article	Who may tax	Indian rate before surcharge and cess (%)
Unlisted shares of an Indian company held more than 24 months	13(5)	India and Australia	12.5, section 197
Unlisted shares held 24 months or less	13(5)	India and Australia	35
Shares deriving their value mainly from Indian real property	13(4), with MLI Article 9(1)	India and Australia	Domestic rates
Buy back by the Indian company from 1 Apr 2026	13(5), on our reading	India and Australia	Capital gain; extra tax for promoters under section 69
Debentures of an Indian company	13(6)	Domestic law of each country applies	Domestic rates
Shares of an Australian company holding Indian shares	13(5) gives Australia a right; 13(6) and section 9(10) need review	Possibly both	Domestic rates if India's law reaches it
Indian real property or PE assets	13(1), 13(2)	India	Domestic rates

Sources: India Australia DTAA, Article 13; MLI synthesised text; sections 9, 69 and 197 of the Income Tax Act, 2025.

Article 13 has no paragraph that makes any share gain taxable only in the seller's country. That differs from the Germany or Japan treaty, where, on our reading, gains on debentures go to the residence country alone. On our reading, a gain on compulsorily convertible debentures stays within Indian domestic law under Article 13(6).

An indirect transfer needs care. Section 9(10) of the Income Tax Act, 2025 taxes gains on shares of a foreign company that derive value substantially from Indian assets. We do not rely on the Australia treaty to block that charge without a written opinion. The buyer usually wants a Form 128 certificate first, covered in our note on lower TDS certificates.

From 1 Apr 2026 the Finance Act, 2026 taxes a buy back as a capital gain, not a deemed dividend. Section 69 adds tax for promoters, and a holder above 10 percent of an unlisted company counts as one. Rule 128(2) of the Income Tax Rules, 2026, as substituted by Notification No. 55/2026, keeps GAAR away from gains on investments made before 1 Apr 2017.

How does the MLI change the India Australia treaty?

The MLI entered into force for Australia on 1 Jan 2019 and for India on 1 Oct 2019. For India it has effect for withholding events and taxable periods from 1 Apr 2020. For Australia it has effect for withholding events from 1 Jan 2020. India's synthesised text shows these provisions:

1. Preamble and principal purpose test, MLI Articles 6 and 7(1). A benefit is denied where obtaining it was "one of the principal purposes" of an arrangement.
2. Dual resident entities, MLI Article 4(1). It replaces the place of effective management tie breaker in Article 4(3). The competent authorities decide residence by mutual agreement.
3. Land rich shares, MLI Article 9(1). Article 13(4) now tests value at any time in the 365 days before the sale, and covers comparable interests.
4. PE rules, MLI Articles 13, 14 and 15. The exemptions must be preparatory or auxiliary, group activities are combined, and connected contracts are added up.
5. Saving clause, MLI Article 11. Each country keeps its right to tax its own residents.
6. Mutual agreement, MLI Article 16(3). The competent authorities shall endeavour to resolve difficulties in applying the treaty.

The synthesised text does not show MLI Articles 8, 10, 12 or 17. Article 9(3) of the treaty already provides a corresponding adjustment, so the absence of MLI Article 17 changes little.

The residence change matters for an Australian company run from India. Section 6(10) of the Income Tax Act, 2025 makes a company resident in India if its place of effective management is here. Under MLI Article 4(1), a dual resident company gets no treaty relief until the authorities agree. CBDT Circular No. 01/2025 of 21 Jan 2025 guides officers on the PPT and grandfathers no Australian provision. Our guide to GAAR in India for foreign companies covers Chapter XI.

Which documents does an Australian company need?

Section 159(8) of the Income Tax Act, 2025 needs two things. One is a tax residency certificate from Australia, which the Australian Taxation Office (ATO) issues as a certificate of residency. The other is the prescribed information in Form 41, filed online under rule 75. The Indian payer also wants a PAN or the rule 217 details, declarations and a chartered accountant's Form 146.

Document	Issued or filed by	What it supports	Timing
Certificate of residency	ATO, on the non individual request form (NAT 75442) sent by secure mail in Online services for business, or by post	Section 159(8)(a); Article 4	Must cover the date of credit or payment
Form 41 (old Form 10F)	Australian company, online	Section 159(8)(b); rule 75	Once per tax year, before the first payment
PAN, or the rule 217 details	Australian company	Avoids the higher rate under section 397(2)	Before tax is deducted
Beneficial ownership and no PE declarations, with a log of staff days in India	Australian company	Articles 5, 7, 10(2), 11(2) and 12(2)	Each year, updated on any change
Service agreement and evidence of what was made available	Both companies	Article 12(3)(g)	Before the first invoice
Form 146 (old 15CB), then Form 145 (old 15CA)	Chartered accountant, then Indian company	Rate and article checked; remittance information	Before the money leaves India
Form 131 (old 16A)	Indian company, from TRACES	Credit for Indian tax in Australia	Within 15 days of the Form 144 due date

The ATO's request form for non individuals is the "Certificate of residency and certification of overseas tax relief" form (NAT 75442). A primary or authorised contact, or the tax agent, sends it by secure mail in Online services for business or Online services for agents. Paper requests go to the ATO at PO Box 3544, Albury NSW 2640. The ATO aims to finish requests within 50 days, and the company's income tax lodgments must be up to date.

Australia's tax year usually runs from 1 July to 30 June, and India's from 1 April to 31 March. Ask for a certificate that covers every Indian payment date, or for two certificates. Rule 217 lists four items that stand in for a PAN under section 397(2). They are contact details, the foreign address, the residence certificate and the foreign tax identification number. The Form 41 guidance note says the form is filed "only once in a tax year" and PAN is optional. It also says: "Benefit of DTAA is available only with filing of Form 41."

Our guide to Form 10F and the tax residency certificate covers Form 41 step by step. If the certificate arrives late, deduct at the domestic rate, and the Australian company claims the excess through its Indian return. The other route is a lower deduction certificate in Form 128 under section 395(1).

Beyond these tax documents, our guide to FEMA compliance for Australian owned subsidiaries covers the RBI reporting that follows the investment.

Does an Australian company have to file an Indian tax return?

Yes, whenever it takes a treaty rate below the domestic rate. Section 207(8) of the Income Tax Act, 2025 excuses a foreign company only on two conditions. Its Indian income must consist of section 207 items, and tax must be deducted at the section 207 rate or more. A 15 percent or 10 percent treaty rate is below 20 percent, so the exemption fails.

So an Australian parent paid a treaty rate dividend, interest or royalty files an Indian return for that tax year. It needs a PAN, and section 263 sets the due date for companies. Capital gains and PE profits also need a return.

On the Australian side, Article 24(1) gives a credit for Indian tax against Australian tax on the same income. How Australian law treats a dividend from an Indian subsidiary is a question for the Australian adviser. Article 24(3) limited the tax sparing rule in Article 24(2) to the first ten years of income. The countries could extend it by an exchange of letters.

What changed in 2026

The treaty text did not change in 2026. The Indian law around it changed, with a new Act and new forms from 1 Apr 2026. Board papers, Forms 146 and bank letters should now cite sections 159 and 393, not sections 90 and 195.

Item	Until 31 Mar 2026	From 1 Apr 2026 or later	Instrument
Treaty relief and the more beneficial rule	Section 90(1) and 90(2)	Section 159(1) and 159(4)	Income Tax Act, 2025
GAAR override of treaties	Section 90(2A)	Section 159(6)	Income Tax Act, 2025
Residence certificate and other documents	Section 90(4) and 90(5)	Section 159(8)(a) and 159(8)(b)	Income Tax Act, 2025
Treaty information form	Form 10F, rule 21AB	Form 41, rule 75	Income Tax Rules, 2026
Withholding on payments to non residents	Section 195	Section 393(2), Table serial 17	Income Tax Act, 2025
Rates on dividends, interest, royalties and technical fees	Section 115A	Section 207	Income Tax Act, 2025
Royalty and technical fees at home	Section 9(1)(vi) and 9(1)(vii)	Section 9(6) and 9(7)	Income Tax Act, 2025
Remittance, statement and certificate forms	Forms 15CA, 15CB, 27Q and 16A	Forms 145, 146, 144 and 131	Income Tax Rules, 2026
Foreign tax credit statement	Form 67	Form 44	Income Tax Rules, 2026
GAAR carve out for investments made before 1 Apr 2017	Rule 10U(1)(d)	Rule 128(2) as substituted	Notification No. 55/2026, 31 Mar 2026
Buy back by an Indian company	Deemed dividend from 1 Oct 2024, so Article 10	Capital gain, so Article 13(5) on our reading	Finance Act, 2026

The other changes are mapped in our note on the Income Tax Act, 2025.

Worked example

An Australian parent paid a royalty, an equipment fee, a management fee, interest and a dividend

AusCo Pty Ltd is resident in Australia and owns 100 percent of IndiaCo Private Limited, an engineering services company. A nominee holds one share for AusCo. In tax year 2026-27 IndiaCo pays AusCo five amounts:

1. A trade mark and know how royalty of INR 1,00,00,000.
2. A hire fee of INR 20,00,000 for testing equipment.
3. A management fee of INR 60,00,000 for finance, HR and legal oversight run from Sydney.
4. Interest of INR 50,00,000 on an Australian dollar ECB from AusCo, priced at arm's length.
5. An interim dividend of INR 3,00,00,000, declared by the Board on 10 Nov 2026.

AusCo filed Form 41 for tax year 2026-27 in May 2026. It holds a certificate of residency covering every payment date, a PAN and declarations of beneficial ownership and no PE. Its staff spent 40 days in India in the 12 months, on no single project.

The royalty bears 15 percent under Article 12(2)(b). The equipment fee bears 10 percent under Article 12(2)(a). The management fee makes nothing available. On our reading it is business profit under Article 7, and India does not tax it without a PE. The interest and the dividend bear 15 percent under Articles 11(2) and 10(2).

Without the treaty papers, every payment bears 20 percent under section 207. The year's total to AusCo is INR 5,30,00,000, in the 2 percent surcharge slab. The domestic effective rate is 21.216 percent.

Payment (INR)	Treaty route (INR)	Domestic route, 21.216% (INR)
Royalty, 1,00,00,000	15,00,000 (15%)	21,21,600
Equipment hire, 20,00,000	2,00,000 (10%)	4,24,320
Management fee, 60,00,000	Nil (Article 7, no PE)	12,72,960
Interest on the ECB, 50,00,000	7,50,000 (15%)	10,60,800
Dividend, 3,00,00,000	45,00,000 (15%)	63,64,800
Total tax withheld	69,50,000	1,12,44,480
Net amount remitted from 5,30,00,000	4,60,50,000	4,17,55,520

The domestic dividend line builds up in three steps. Tax at 20 percent of INR 3,00,00,000 is INR 60,00,000. Surcharge at 2 percent adds INR 1,20,000. Cess at 4 percent on INR 61,20,000 adds INR 2,44,800, for INR 63,64,800. On the treaty route AusCo receives INR 42,94,480 more.

IndiaCo deposits each deduction by the 7th of the next month under rule 218(2), and files Form 144 under rule 219. For the management fee it still files Form 145 with a Form 146 that states the Article 7 analysis. It reports the royalty, hire fee, management fee and interest in its transfer pricing report in Form 48 under section 172. Our guide to dividends from an Indian subsidiary covers the company law steps.

The same consultants stay longer

Now suppose AusCo sends three consultants to deliver a process redesign for an unrelated Indian customer. They work in India on that project for a total of 200 days between 1 Jul 2026 and 30 Jun 2027. That is more than 183 days in a 12 month period, so Article 5(3)(a) creates a services PE.

India then taxes AusCo's profit from the project at 35 percent, plus surcharge and cess, through an Indian return. The customer may also want to withhold under section 393(2) at the domestic rate, so AusCo should apply for a Form 128 certificate early. Had the work ended at 150 days, there would be no services PE under Article 5(3)(a).

The Indian subsidiary bills its Australian parent

IndiaCo also earns INR 12,00,00,000 in the year from AusCo for software development done wholly in Bengaluru. Suppose the work trains AusCo's staff to run the system, so it falls within Article 12(3)(g). Before section 11J, Australia could tax that fee at up to 15 percent, which would have been INR 1,80,00,000.

Section 11J removes that Australian tax for income years starting on or after 29 Dec 2022. The fee must not be a royalty under Australian domestic law. IndiaCo then receives the fee without Australian tax and has no Australian credit to claim in Form 44. India taxes the fee as part of IndiaCo's business income at the company rate it has chosen.

Common mistakes

1. Using a 10 percent rate for a trade mark or know how royalty. Fix: 10 percent covers only equipment royalties and related services; other royalties bear 15 percent under Article 12(2)(b).
2. Treating every service fee as a royalty. Fix: test each service against Article 12(3)(d) and (g); a fee that makes nothing available is business profit.
3. Ignoring the 183 day services PE. Fix: log staff days in India by project and watch the 12 month window.
4. Reading section 11J as a treaty change. Fix: it is Australian law and does not change India's tax on payments to Australia.
5. Adding surcharge and cess to the treaty rate. Fix: apply the treaty rate flat and cite the article in Form 146.
6. Assuming debenture gains are exempt in India. Fix: Article 13(6) keeps Indian domestic law for property outside Article 13(1) to (5).
7. Relying on the Australian certificate alone. Fix: file Form 41 each tax year and keep beneficial ownership evidence.
8. Telling the parent the treaty rate ends its Indian filings. Fix: plan a PAN and an Indian return under section 207(8).

Checklist

1. Confirm the Australian company holds a certificate of residency covering each payment date.
2. File Form 41 once for the tax year before the first payment.
3. Obtain a PAN, or collect the four rule 217 items.
4. Classify each payment as dividend, interest, equipment royalty, other royalty, make available service, business profit or capital gain.
5. Apply 15 percent to dividends, interest and other royalties, and 10 percent to equipment royalties.
6. Test each service fee against Article 12(3)(d) and (g) before deducting tax.
7. Log Australian staff days in India by project against the 183 day rule in Article 5(3)(a).
8. Collect beneficial ownership and no PE declarations, and keep the substance file for the PPT.
9. Deduct tax at the earlier of credit and payment, at the flat treaty rate.
10. Obtain Form 146 and file Form 145 before each remittance, including for fees outside Article 12.
11. Deposit the tax by the 7th of the next month, file Form 144 and issue Form 131.
12. Check with the Australian adviser whether section 11J covers fees the Indian company bills to Australia.
13. Remind the Australian company to file its Indian return.

To have us review an Australian payment, a service model or a share sale before it happens, send the agreement and the shareholding through our contact page.

Frequently Asked Questions

What is the dividend rate under the India Australia DTAA?+

It is 15 percent of the gross dividend under Article 10(2). The treaty sets one rate for every size of holding, with no lower rate for a parent company. Domestic law charges 20 percent under section 207(1) of the Income Tax Act, 2025, plus surcharge and cess. The payer needs the certificate of residency and Form 41.

What is the TDS rate on interest paid to an Australian company?+

Article 11(2) caps it at 15 percent of the gross interest for an Australian beneficial owner. The article has no exemption for government lenders or the central bank. Domestic law charges 20 percent on foreign currency loans and 35 percent on rupee loans, plus surcharge and cess. So the treaty helps most on rupee loans.

What is the royalty rate under the India Australia DTAA?+

It depends on the royalty. Equipment royalties and services ancillary to them bear 10 percent under Article 12(2)(a). Other royalties, including trade marks, know how and make available services, bear 15 percent under Article 12(2)(b). The higher 20 percent rate applied only in the treaty's first five years of income.

Are management fees paid to an Australian parent taxed in India?+

Not usually, if the services make nothing available. Article 12(3)(g) covers only services that make available technical knowledge, skill or know how, or develop and transfer a technical plan. A pure management fee is business profit under Article 7. India then taxes it only if the Australian company has a PE in India.

What is the service PE threshold in the India Australia treaty?+

More than 183 days in any 12 month period. Article 5(3)(a), as substituted by the protocol notified on 20 Sep 2013, covers services furnished through employees or other personnel. The services must be for the same or a connected project. Natural resource activities have a 90 day threshold under Article 5(3)(b).

What did Australia change in 2022 on offshore technical services?+

Act No. 60 of 2022 inserted section 11J into Australia's International Tax Agreements Act 1953. It stops the India treaty from subjecting fees for Article 12(3)(g) services to Australian tax where they are not royalties under Australian law. It applies to income years starting on or after 29 Dec 2022, the date ECTA entered into force.

Does ECTA change the India Australia DTAA?+

No. ECTA is a trade agreement that entered into force on 29 Dec 2022, and the treaty text on incometaxindia.gov.in did not change. Australia changed the tax result through section 11J of its International Tax Agreements Act 1953. India's tax on payments from India to Australia still follows the treaty as amended in 2013.

Does India tax an Australian company's gain on Indian shares?+

Yes. Article 13(5) lets India tax gains on shares of an Indian company under its own law, with no holding threshold. A long term gain on unlisted shares bears 12.5 percent under section 197 of the Income Tax Act, 2025, plus surcharge and cess. Article 13(6) also keeps domestic law for other property, such as debentures.

Does the principal purpose test apply to the India Australia treaty?+

Yes. MLI Article 7(1) applies to the treaty, with effect in India for withholding events and taxable periods from 1 Apr 2020. CBDT Circular No. 01/2025 guides officers and grandfathers no Australian provision. Beneficial ownership and GAAR under section 159(6) of the Income Tax Act, 2025 also apply.

How is a company resident in both India and Australia treated?+

MLI Article 4(1) replaced the place of effective management tie breaker in Article 4(3). The competent authorities now decide residence by mutual agreement. Until they agree, the company gets no treaty relief except as they allow. Section 6(10) of the Income Tax Act, 2025 makes a company managed from India resident here.

Does an Australian parent need to file an Indian income tax return?+

Yes, when it takes a treaty rate. Section 207(8) excuses a foreign company only where tax was deducted at the section 207 rate or more. A 15 or 10 percent treaty rate is below the 20 percent domestic rate. So the parent needs a PAN and files a return by the section 263 due date.

What happens if the Australian certificate arrives after the payment?+

The Indian company deducts at the domestic rate under section 207, plus surcharge and cess. Section 159(8) makes the certificate a condition of treaty relief. The Australian company then files an Indian return with the certificate and Form 41 and claims the excess as a refund. A Form 128 certificate under section 395(1) is the other route.

Sources

• Income Tax Department, India Australia DTAA with amending notifications (GSR 60(E), 22 Jan 1992; Notification No. 74/2013, 20 Sep 2013), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/australia-comprehensive-agreements-1
• Income Tax Department, Synthesised text of the MLI and the India Australia agreement, read 23 Oct 2026, https://www.incometaxindia.gov.in/w/australia-synthesised-text-1
• Australian Taxation Office, Legal Database, International Tax Agreements Act 1953, section 11J (Agreement with India) and history note, read 23 Oct 2026, https://www.ato.gov.au/law/view/document?docid=PAC/19530082/11J
• Federal Register of Legislation, Act No. 60 of 2022 (Treasury Laws Amendment Act implementing the Australia India ECTA), 23 Nov 2022, https://www.legislation.gov.au/C2022A00060/latest/text
• Federal Register of Legislation, International Tax Agreements Act 1953 (compilation of 1 Oct 2026), https://www.legislation.gov.au/C1953A00082/latest/text
• Department of Foreign Affairs and Trade, Australia India ECTA, read 23 Oct 2026, https://www.dfat.gov.au/trade/agreements/in-force/australia-india-ecta
• Australian Border Force, Australia India Economic Cooperation and Trade Agreement (signed virtually on 2 Apr 2022), read 23 Oct 2026, https://www.abf.gov.au/importing-exporting-and-manufacturing/fta/free-trade-agreements/india
• Australian Taxation Office, Certificate of residency and certification of overseas tax relief, request form for non individuals (NAT 75442), read 23 Oct 2026, https://www.ato.gov.au/forms-and-instructions/certificate-of-residency-and-certification-of-overseas-tax-relief-non-individual
• Income Tax Department, Income Tax Act, 2025 as amended by the Finance Act, 2026, https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf
• Income Tax Department, Section 159 of the Income Tax Act, 2025 (double taxation relief), https://www.incometaxindia.gov.in/w/section-159-89
• Income Tax Department, Section 207 of the Income Tax Act, 2025 (sub sections (1), (2) and (8)), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-207-78
• Income Tax Department, Sections 6, 9 and 197 of the Income Tax Act, 2025, https://www.incometaxindia.gov.in/w/section-6-1, https://www.incometaxindia.gov.in/w/section-9-1, https://www.incometaxindia.gov.in/w/section-197-78
• Income Tax Department, Sections 393, 397, 398 and 448 of the Income Tax Act, 2025, https://www.incometaxindia.gov.in/w/section-393-6, https://www.incometaxindia.gov.in/w/section-397-6, https://www.incometaxindia.gov.in/w/section-398-6, https://www.incometaxindia.gov.in/w/section-448-6
• Income Tax Department, Rules 215, 217, 218, 219 and 220 of the Income Tax Rules, 2026, https://www.incometaxindia.gov.in/w/rule-215-1, https://www.incometaxindia.gov.in/w/rule-217-1, https://www.incometaxindia.gov.in/w/rule-218-1, https://www.incometaxindia.gov.in/w/rule-219-1, https://www.incometaxindia.gov.in/w/rule-220-1
• Income Tax Department, First Schedule to the Finance Act, 2026 (Part II rates), https://www.incometaxindia.gov.in/w/first-schedule-104
• Income Tax Department, Guidance note on Form 41, https://www.incometaxindia.gov.in/documents/d/guest/fn-41
• Income Tax Department, FAQs and Guidance Notes on Forms as per Income Tax Rules, 2026 (form map), https://www.incometaxindia.gov.in/faqs-and-guidance-notes-on-forms-as-per-income-tax-rules-2026
• Central Board of Direct Taxes, Circular No. 01/2025, Guidance for application of the Principal Purpose Test under India's DTAAs, 21 Jan 2025, https://www.incometaxindia.gov.in/documents/d/guest/circular-1-2025-pdf
• Central Board of Direct Taxes, Notification No. 55/2026, Income Tax (Amendment) Rules, 2026 (rule 128), 31 Mar 2026, https://www.incometaxindia.gov.in/documents/d/guest/notification-no-55-2026-1-pdf
• Supreme Court of India, Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax, 2 Mar 2021, https://api.sci.gov.in/supremecourt/2011/38137/38137_2011_33_1501_26629_Order_02-Mar-2021.pdf