Australian Tax Treaties
Indian Agreement
AGREEMENT BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE REPUBLIC OF INDIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
ARTICLE 24
Methods of Elimination of Double Taxation
(1)
(a) Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Indian tax paid under the law of India and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in India shall be allowed as a credit against Australian tax payable in respect of that income.
(b) Where a company which is a resident of India and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in subparagraph (a) shall include the Indian tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.
(2)
In paragraph (1), Indian tax paid shall include:
(a) subject to subparagraph (b), an amount equivalent to the amount of any Indian tax forgone which, under the law of India relating to Indian tax and in accordance with this Agreement, would have been payable as Indian tax on income but for an exemption from, or reduction of, Indian tax on that income in accordance with:
(b) in the case of interest derived by a resident of Australia which is exempted from Indian tax under the provisions referred to in subparagraph (a), the amount which would have been payable as Indian tax if the interest had not been so exempt and if the tax referred to in paragraph (2) of Article 11 did not exceed 10 per cent of the gross amount of the interest.
(3)
Paragraph (2) shall apply only in relation to income derived in any of the first 10 years of income in relation to which this Agreement has effect under subparagraph (1)(a)(ii) of Article 28 or in any later year of income that may be agreed by the Contracting States in letters exchanged for this purpose.
(4)
In the case of India, double taxation shall be avoided as follows:
(a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India in respect of income from sources within Australia which has been subjected to tax both in India and Australia shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax; and
(b) for the purposes of the credit referred to in subparagraph (a) above, where the resident of India is a company by which surtax is payable, the credit to be allowed against Indian tax shall be allowed in the first instance against the income tax payable by the company in India and, as to the balance, if any, against the surtax payable by it in India.
(5)
Where a resident of one the Contracting States derives income which, in accordance with the provisions of this Agreement shall be taxable only in the other Contracting State, the firstmentioned State may take that income into account in calculating the amount of its tax payable on the remaining income of that resident.
As amended by the Indian Protocol (No 1)
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) has modified the application of this tax treaty. A synthesised text of the MLI and this tax treaty is available to facilitate the understanding of how the MLI modifies this tax treaty.
(a) Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Indian tax paid under the law of India and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in India shall be allowed as a credit against Australian tax payable in respect of that income.
(b) Where a company which is a resident of India and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in subparagraph (a) shall include the Indian tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.
(2)
In paragraph (1), Indian tax paid shall include:
(a) subject to subparagraph (b), an amount equivalent to the amount of any Indian tax forgone which, under the law of India relating to Indian tax and in accordance with this Agreement, would have been payable as Indian tax on income but for an exemption from, or reduction of, Indian tax on that income in accordance with:
(i) section 10(4), 10(15)(iv), 10A, 10B, 80HHC, 80HHD or 80I of the Income Tax Act, 1961, insofar as those provisions were in force on, and have not been modified since, the date of signature of this Agreement, or have been modified only in minor respects so as not to affect their general character; or
(ii) any other provision which may subsequently be made granting an exemption from or reduction of Indian tax which the Treasurer of Australia and the Minister of Finance of India agree from time to time in letters exchanged for this purpose to be of a substantially similar character, if that provision has not been modified thereafter or has been modified only in minor respects so as not to affect its general character; and
(b) in the case of interest derived by a resident of Australia which is exempted from Indian tax under the provisions referred to in subparagraph (a), the amount which would have been payable as Indian tax if the interest had not been so exempt and if the tax referred to in paragraph (2) of Article 11 did not exceed 10 per cent of the gross amount of the interest.
(3)
Paragraph (2) shall apply only in relation to income derived in any of the first 10 years of income in relation to which this Agreement has effect under subparagraph (1)(a)(ii) of Article 28 or in any later year of income that may be agreed by the Contracting States in letters exchanged for this purpose.
(4)
In the case of India, double taxation shall be avoided as follows:
(a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India in respect of income from sources within Australia which has been subjected to tax both in India and Australia shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax; and
(b) for the purposes of the credit referred to in subparagraph (a) above, where the resident of India is a company by which surtax is payable, the credit to be allowed against Indian tax shall be allowed in the first instance against the income tax payable by the company in India and, as to the balance, if any, against the surtax payable by it in India.
(5)
Where a resident of one the Contracting States derives income which, in accordance with the provisions of this Agreement shall be taxable only in the other Contracting State, the firstmentioned State may take that income into account in calculating the amount of its tax payable on the remaining income of that resident.
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