Withholding tax is collected by the payer when dividends, interest, royalties or service fees go to a non-resident. Domestic law sets the default rate; a treaty can cap it, but only if the recipient is resident in the treaty partner, is the beneficial owner, can prove both, and passes the treaty's anti-abuse rules. India's domestic rates are high and its treaty network is wide, so the gap is often material.
How withholding works
The payer deducts tax and pays it to its own tax authority, so the cost falls on the recipient but the compliance risk sits with the payer. In India, payments made or credited on or after 1 April 2026 fall under the withholding provisions of the Income-tax Act, 2025. Dividends received by a foreign company are taxed at 20% under section 207 of that Act, before any surcharge and cess.
The US withholds 30% federal tax on most US-source income paid to foreign persons unless a treaty reduces it. In the UK, a borrower paying interest to a treaty-passported overseas lender must keep withholding until HMRC issues a Direction. India applies the domestic rate or the treaty rate, whichever is more beneficial to the non-resident.12345
How treaties reduce the rate: Articles 10 to 12
The OECD Model caps dividends at 5% for substantial corporate holdings and 15% otherwise, caps interest at 10%, and leaves royalties to the residence country alone. Real treaties depart from this. India's treaties generally allow source taxation of royalties, and several add a separate article for fees for technical services.
The table shows how far the rates move depending on where the recipient is resident. For example, India-Saudi Arabia caps dividends at 5% and India-US at 15% or 25% depending on the holding. The UAE and Saudi treaties have no separate technical-fees article, which affects how service fees are treated.6789101112131415
Proving entitlement: residence certificates and beneficial ownership
Treaty rates are only available to a beneficial owner, the wording used in Article 10(2) of both the India-UAE and India-Singapore treaties. A conduit company that passes the income straight on is at risk of being refused. India requires a tax residency certificate and prescribed information to claim treaty relief, and remittances are supported by an accountant's certificate that states the treaty provision and rate applied.
The US equivalent is Form W-8BEN-E. Federal treaty relief does not bind every US state, so state taxes should be checked separately. Not every pair of countries has a treaty: the IRS list does not include the UAE, Saudi Arabia or Singapore, so the 30% default applies to US-source payments to residents of those countries unless domestic relief is available.7161718192021
| Recipient | Dividends | Interest | Royalties | Fees for technical services |
|---|---|---|---|---|
| No treaty (Income-tax Act general rate) | 20% | 20% (foreign-currency loans; lower rates for specified bonds) | 20% | 20% |
| UAE | 10% | 5% (bank) / 12.5% | 10% | No separate article |
| Singapore | 10% (25%+ company holding) / 15% | 10% (bank or similar) / 15% | 10% | 10% |
| Saudi Arabia | 5% | 10% | 10% | No separate article |
| United Kingdom | 10% (15% certain property vehicles) | 10% (bank) / 15% | 10% / 15% | 10% / 15% |
| United States | 15% (10%+ voting stock) / 25% | 10% (bank or similar) / 15% | 10% / 15% | 10% / 15% |
| Germany | 10% | 10% | 10% | 10% |
| France | 10% | 10% | 10% | 10% |
Decisions to make
- Is the recipient the beneficial owner, or does it pass the income on?716Treaty caps apply only to a beneficial owner.
- Does the recipient hold a tax residency certificate for the relevant period?17India requires one to grant treaty relief.
- Is the payment a royalty, a technical fee or a business profit?91011Classification decides whether the treaty allows source tax at all, and some treaties have no technical-fees article.
- Is the payment made or credited before or after 1 April 2026?1That decides whether India's 1961 or 2025 Act withholding rules apply.
Documents usually needed
- Tax residency certificate of the recipient for the relevant year
- Form 10F or the equivalent information required under India's current rules
- Form 15CB accountant's certificate and Form 15CA remittance declaration (India)
- IRS Form W-8BEN-E (US-source payments)
- HMRC DTTP2 notification and Direction letter (UK interest under the treaty passport scheme)
- Beneficial ownership and no-PE declarations from the recipient
Common mistakes
- Applying a treaty rate without a valid residency certificate on file
- Treating service fees as business profits without checking for a technical-fees article
- Ignoring US state tax when relying on a federal treaty
- Applying the wrong Indian Act to a payment made around 1 April 2026
- Assuming a holding company qualifies for treaty rates without substance or a commercial purpose
Questions businesses ask
Why can the treaty rate be lower than India's domestic rate?
India taxes non-residents under its domestic law or the treaty, whichever is more beneficial to them, provided they qualify for the treaty.5
What this guide does not yet confirm
These points need checking with a qualified local professional before you rely on them.
- Indian surcharge and health and education cess on domestic non-resident rates were not confirmed.
- Income-tax Act, 2025 section numbers for the treaty-relief and residency certificate rule, and for non-resident withholding, were not confirmed; the residency certificate point is a research draft.
- Domestic withholding rates in the UAE, Saudi Arabia, Singapore, the UK, Germany and France could not be confirmed (search budget exhausted and official pages rate-limited).
- Most-favoured-nation protocols in some Indian treaties (for example France) were not examined.
- The OECD Model rates are recorded as a research draft because the OECD text could not yet be checked.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 18 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
Any sum paid or credited on or after 1 April 2026 is governed by the corresponding withholding provisions of the Income-tax Act, 2025; sums paid or credited on or before 31 March 2026 remain under the 1961 Act. Indian tax deduction at source (TDS).
Under section 207 of the Income-tax Act, 2025, dividends received by a foreign company are taxed at 20%, other than dividends from a unit in an International Financial Services Centre, which are taxed at 10%. Rate before any surcharge and health and education cess, which were not confirmed.
Surcharge and cess are not stated on this page.
Most types of US-source income received by a foreign person are subject to US federal tax of 30%, collected by withholding, unless a treaty provides a reduced rate or exemption. US federal withholding on fixed or determinable income of non-resident aliens and foreign entities.
Under the UK Double Taxation Treaty Passport scheme a UK borrower must continue to withhold tax from interest paid to a passported overseas lender until HMRC issues a Direction, and must notify HMRC of the loan on form DTTP2. UK-source loan interest paid to overseas corporate lenders holding a treaty passport. The UK domestic withholding rate is not stated on this page.
India taxes a non-resident's dividends, interest, royalties and fees for technical services under the Income-tax Act or the applicable treaty, whichever is more beneficial to the non-resident. Requires the non-resident to be entitled to the treaty (residence, beneficial ownership, documentation, anti-abuse rules).
The page states it reflects the Income-tax Act, 1961 as amended by the Finance Act, 2026; its 'last reviewed' date is blank.
The OECD Model caps source taxation of dividends at 5% for a company beneficial owner holding at least 25% of the capital for 365 days and 15% otherwise, caps interest at 10%, and allocates royalties exclusively to the residence state. OECD Model Articles 10(2), 11(2) and 12(1) (2017); individual treaties frequently depart from these rates, as the Indian treaty examples show.
The article wording could not yet be checked. Statement reflects the 2017 OECD Model; confirm against the publication before relying on it.
Under Article 10(2) of the India-UAE DTAA, tax in the source state on dividends paid to a beneficial owner resident in the other state may not exceed 10% of the gross amount. Applies in either direction; no MLI modification to Article 10 shown in the synthesised text.
Under Article 11(2) of the India-UAE DTAA, source-state tax on interest is capped at 5% where paid on a loan granted by a bank or similar financial institution and 12.5% in all other cases. Beneficial owner resident in the other state.
Under Article 12(2) of the India-UAE DTAA, source-state tax on royalties is capped at 10% of the gross amount. The department's comparison table shows no separate fees-for-technical-services provision in this treaty.
The Income Tax Department lists India-Singapore treaty rates of 10% (bank or similar institution, including insurers) or 15% on interest, 10% on royalties and 10% on fees for technical services. India-Singapore DTAA Articles 11 and 12.
The Income Tax Department lists India-Saudi Arabia treaty rates of 5% on dividends, 10% on interest and 10% on royalties, with no separate provision for fees for technical services. India-Saudi Arabia DTAA.
The Income Tax Department lists India-UK treaty rates of 10% on dividends (15% for certain property-linked distributions by investment vehicles), 10% (paid to a bank) or 15% on interest, and 10% or 15% on royalties and fees for technical services. India-UK DTAA.
The Income Tax Department lists India-US treaty rates of 15% on dividends where the recipient holds at least 10% of the voting stock and 25% otherwise, 10% (bank or similar institution) or 15% on interest, and 10% or 15% on royalties and fees for included services. India-US DTAA.
The Income Tax Department lists India-Germany treaty rates of 10% on dividends, interest, royalties and fees for technical services. India-Germany DTAA.
The Income Tax Department lists India-France treaty rates of 10% on dividends, interest, royalties and fees for technical services. India-France DTAA; the France treaty has a most-favoured-nation protocol that was not examined.
Article 10(2) of the India-Singapore DTAA caps source-state tax at 10% of the gross dividend if the beneficial owner is a company owning at least 25% of the shares of the paying company, and 15% in all other cases. Beneficial owner condition applies.
Secondary reproduction of the treaty text; the official India-Singapore synthesised text on incometaxindia.gov.in could not yet be checked. The rates match the department's official comparison table.
India requires a non-resident to obtain a tax residency certificate from its country of residence to claim treaty relief, together with prescribed additional information (Form 10F under the 1961 rules). Income-tax Act, 1961 section 90(4)-(5) and rules; 2025 Act and Income-tax Rules, 2026 equivalents apply from 1 April 2026.
Point reflects the Income-tax Act, 1961 and its CBDT guidance. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered provisions; the corresponding 2025 Act section and any CBDT guidance re-issued under it could not yet be checked.
For remittances from India, the accountant's certificate in Form 15CB certifies, among other things, the applicable DTAA provisions and the TDS rate. Remittance procedures follow the law in force on the remittance date.
Foreign entities use IRS Form W-8BEN-E to certify beneficial-owner status for US withholding and reporting. US federal.
The IRS notes that some US states do not honour the provisions of federal income tax treaties. US state income taxes.
The IRS list of US income tax treaties includes India, the United Kingdom, Germany and France, but not the UAE, Saudi Arabia or Singapore. Comprehensive income tax treaties listed by the IRS.
The Income Tax Department lists general domestic rates for non-residents of 20% on dividends, 20% on interest on foreign-currency borrowings, 20% on royalties and 20% on fees for technical services, with lower rates for specified bonds and funds. Income-tax Act rates as presented by the department (1961 Act section references such as s115A); surcharge and cess not shown.
Section references on the page are to the 1961 Act; the 2025 Act renumbered these provisions.
The Income Tax Department lists the India-Singapore treaty dividend rate as 10% where the recipient company holds at least 25% of the shares and 15% otherwise. India-Singapore DTAA Article 10.
Questions on this topic
24 statements on withholding tax and treaty rates, 2 not yet checked against a source
