TMI BlogConvention between the Govt. of India and the Govt. of the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital gainsX X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 (43 of 1961), and section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government hereby directs that all the provisions of the said Convention shall be given effect to in the Union of India. The Government of India and the Government of the United Kingdom of Great Britain and Northern Ireland; Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains: Have agreed as follows: ARTICLE 1 Personal scope This Convention shall apply to persons who are residents of one or both of the Contracting States. ARTICLE 2 Taxes covered 1. The taxes which are the subject of this Convention are: (a) in the United Kingdom of Great Britain and Northern Ireland: (i) the income tax; (ii) the corporation tax; (iii) the capital gains tax; (iv) the petroleum revenue tax; and (v) the development land tax; (hereinafter referred to as " United Kingdom tax "); (b) in India: (i) the income-tax and any surcharge thereon imposed under the Income-tax Act, 1961 (43 of 1961); and (ii) the surtax imposed under the Companies (Profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of a Contracting State or a political sub-division or local authority thereof. In relation to the United Kingdom, the term " political sub-division " shall include Northern Ireland. 2. As regards the application of this Convention by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of this Convention. ARTICLE 4 Fiscal domicile 1. For the purposes of this Convention, the term " resident of a Contracting State " means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. 2. Where by reason of the provisions of paragraph 1 of this article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or for collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information or for scientific research, being activities solely of a preparatory or auxiliary character in the trade or business of the enterprise. However, this provision shall not be applicable where the enterprise maintains any other fixed place of business in the other Contracting State for any purpose or purposes other than the purposes specified in this paragraph. 4. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State other than an agent of an independent status to whom paragraph 5 of this Article applies shall be deemed to be a permanent establishment of that enterprise in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of paragraph 1 of this Article shall apply to income derived from the direct use, letting, or use in any other form of immovable property. 4. The provisions of paragraphs 1 and 3 of this Article shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of professional services. ARTICLE 7 Business profits 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. 2. Where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or management, or, except in the case of a banking enterprise by way of interest on monies lent to the permanent establishment. Likewise, no account shall be taken in the determination of the profits of a permanent establishment of amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on monies lent to the head office of the enterprise or any of its other offices. 5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. 6. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article. ARTICLE 8 Air transport 1. Income derived from the operation of aircraft in inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracting State from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) used for the transport of goods or merchandise. 6. The provisions of this Article shall apply also to income derived from participation in a pool, a joint business or an international operating agency. 7. Gains derived by an enterprise of a Contracting State from the alienation of ships or containers owned and operated by the enterprise shall be taxed only in that State if either the income from the operation of the alienated ships or containers was taxed only in that State, or the ships or containers are situated outside the other Contracting State at the time of the alienation. ARTICLE 10 Associated enterprises Where: (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State; and in either case conditions are made or imposed between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not exceed 15 per cent. of the gross amount of the dividend attributable to the new contribution. 5. The preceding paragraphs of this Article shall not affect the taxation of the company in respect of the profits out of which the dividend is paid. 6. The provisions of paragraphs 1, 2 and 3 or, as the case may be, paragraph 4 of this Article shall not apply if the beneficial owner of the dividend, being a resident of a Contracting State, as in the other Contracting State of which the company paying the dividend is a resident, a permanent establishment or fixed base with which the holding by virtue of which the dividend is paid is effectively connected. In such a case the provisions of Article 7 (Business profits) or Article 15 (Independent personal services), as the case may be, shall apply. 7. Where a company which is a resident of a Contracting State, derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. 5. The provisions of paragraphs 1, 2 and 3 of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 (Business profits) or Article 15 (Independent personal services), as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments of any kind to any person, other than payments to an employee of the person making the payments and to any individual for independent personal services mentioned in Article 15 (Independent personal services), in consideration for services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel. 5. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties, or fees for technical services arise through a permanent establishment situated therein, or perform in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 (Business profits) or Article 15 (Independent personal services), as the case may be, shall apply. 6. Royalties and fees for technical services shall be dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Directors' fees), 18 (Artistes and athelets), 19 (Governmental remuneration and pensions), 20 (Students and trainees) and 21 (Teachers), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of the United Kingdom in respect of an employment exercised in India shall not be taxed in India if: (a) he is present in India for a period or periods not exceeding in the aggregate 183 days during the relevant fiscal year; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of India; and (c) the remuneration is not deductible in computing the profits of an enterprise chargeable to Indian tax. 3. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of India in respect of an employment exercised in the United Kingdom shall not be taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m tax. 2. Remuneration, other than a pension, paid by the Government of the United Kingdom to any individual who is a national of the United Kingdom in respect of services rendered in the discharge of governmental functions in India shall be exempt from Indian tax. 3. Any pension paid by the Government of a Contracting State to any individual in respect of services rendered to that Government shall be taxable only in that Contracting State. 4. The provisions of this Article shall not apply to remuneration or pension in respect of services rendered in connection with any trade or business. ARTICLE 20 Students and trainees 1. An individual who is a resident of a Contracting State or was a resident of that State immediately before visiting the other Contracting State and who is temporarily present in that other State for the primary purpose of: (a) studying at a university or other accredited or recognised educational institution in that other Contracting State; or (b) securing training required to qualify him to practise a profession or a professional speciality; or (c) studying or doing research as a recipient of a grant, allowance, or award from a governmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARTICLE 21 Teachers 1. An individual who visits a Contracting State for a period not exceeding two years for the purpose of teaching or engaging in research at a university, college or other recognised educational institution in that State, and who was immediately before that visit a resident of the other Contracting State, shall be exempted from tax by the first-mentioned Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that State for such purpose. 2. This Article shall only apply to income from research if such research is undertaken by the individual in the public interest and not primarily for the benefit of some other private person or persons. ARTICLE 22 Elimination of double taxation 1. Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof): (a) Indian tax payable under the laws of India and in accordance with the provisions of this Convention, whether directly or by deduction, on profits, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which would have been payable as Indian tax but for a deduction allowed in computing the taxable income or an exemption or reduction of tax granted for that year under: (a) sections 10(4), 10(4A), 10(6)(viia), 10(15)(iv), 32A, 33A, 35B, 35CC, 80HH, 80J and 80K of the Income-tax Act, 1961 (43 of 1961), so far as they were in force on and have not been modified since the date of signature of this Convention or have been modified only in minor respects so as not to affect their general character; or (b) any other provision which may subsequently be made granting an exemption or reduction from tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character: Provided that relief from United Kingdom tax shall not be given by virtue of this paragraph in respect of income from any source if the income relates to a period starting more than 10 fiscal years after the exemption from, or reduction of, Indian tax is first granted to the resident of the United Kingdom or to the resident of India, as the case m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng State has in the first-mentioned State at a rate of tax which is higher than that imposed on the profits of a similar enterprise of the first-mentioned Contracting State, nor as being in conflict with the provisions of paragraph 4 of Article 7 of this Convention. 3. Nothing contained in this Article shall be construed as obliging a Contracting State to grant to individual not resident in that State any personal allowances, reliefs and reductions for taxation purposes which are by law available only to individuals who are so resident. 4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of that first-mentioned State are or may be subjected. 5. In this Article, the term " taxation " means taxes which are the subject of this Convention. ARTICLE 24 Mutual agreement procedure 1. Where a resident of a Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a Contracting State which is situated in the other Contracting State and who is subject to tax in that other State only if he derives income from sources therein, shall not be deemed to be a resident of that other State for the purposes of this Convention. ARTICLE 27 Entry into force Each of the Contracting States shall notify to the other the completion of the procedures required by its law for the bringing into force of this Convention. This Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect: (a) in the United Kingdom of Great Britain and Northern Ireland: (i) in respect of income-tax and capital gains tax, for any year of assessment beginning on or after 6th April, in the calendar year next following that in which the later of the notifications is given; (ii) in respect of corporation tax, for any financial year beginning on or after 1st April, in the calendar year next following that in which the later of the notifications is given; (iii) in respect of petroleum revenue tax, for any chargeable period beginning on or after 1st January, in the calendar year next following that in which the later of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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