India has signed tax treaties with various countries, most of which are based on the Organisation of Economic Cooperation and Development (OECD) Model. These treaties provide a favourable method of computing taxable business profits. Specifically, income like dividends, interest, royalty and fees for technical services are taxed at lower rates than those applicable under the domestic law. These treaties generally provide for the complete exemption of profits from the operation of ships and aircraft.
India has tax treaties with over 40 countries including USA, UK, Japan, Germany and France, with whom it has significant economic relationships. This results in a relatively lower tax cost for foreign companies doing business in India.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.