The India-Australia tax treaty (DTAA) can reduce Withholding Tax on dividends, interest and royalties paid to your Australian parent from the domestic 20% (plus surcharge and cess) to 15%, or 10% for equipment royalties, if the parent holds an Australian tax residency certificate from the ATO and files the required declaration (Form 41, previously Form 10F). Separately, an Australian company can be taxed in India if it has a permanent establishment there, for example through its own staff providing services for more than 183 days in a 12-month period.
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Key facts
| Treaty | Agreement between India and Australia for the avoidance of double taxation and the prevention of fiscal evasion (signed 1991, amended by the 2011 Protocol notified in India in September 2013) |
|---|---|
| Benefit claimed with | Certificate of residency from the ATO (the Tax Residency Certificate), Form 41 (previously Form 10F), and a no-PE declaration where asked |
| Withholding Tax on non-resident payments | Section 393 of the Income-tax Act, 2025 (previously Section 195) |
| Rate applied | The lower of the domestic rate and the treaty rate, where the conditions are met |
| Treaty rates | Dividends 15%; interest 15%; royalties and fees for services that make technical knowledge available 15% (10% for equipment royalties) |
| PE risk arises from | Fixed place, dependent agents, service presence (over 183 days in any 12 months), construction projects (over 6 months) and substantial equipment |
| Who bears the risk | The Australian parent, not the Indian subsidiary |
How the treaty helps
Without a treaty, India taxes dividends, interest, royalties and technical fees paid to non-residents at domestic rates, which are 20% plus surcharge and cess for most of them. The treaty caps those rates for dividends (Article 10), interest (Article 11) and royalties and technical fees (Article 12). The rate that applies depends on the type of payment and the conditions in the treaty and the current law, so we confirm it before each payment.
The Indian payer deducts Withholding Tax under Section 393 (previously Section 195) at the applicable rate and deposits it with the government. For the Australian parent, the Indian tax is treated differently by type of income: see the Australian parent section below. For an article-by-article guide, read the India-Australia DTAA guide.
Documents to claim treaty benefits
- Tax Residency Certificate: a certificate of residency issued by the ATO (the form for companies is NAT 75442) to show the Australian company is an Australian tax resident for the relevant period.
- Form 41 (previously Form 10F): a statement the non-resident files with the Indian payer or electronically, giving residency details.
- Declaration of no permanent establishment in India, where the payer or the tax officer asks for it.
- Beneficial ownership evidence: the recipient should be the real owner of the income and not a conduit. The principal purpose test from the Multilateral Instrument, which both countries have signed, can deny treaty benefits where obtaining them was one of the main purposes of an arrangement.
Keep these ready before the first payment. Missing documents are the usual reason the higher domestic rate is applied.
Permanent establishment: when an Australian company becomes taxable in India
| Type | What triggers it |
|---|---|
| Fixed place PE | An office, branch, factory or other fixed place of business in India through which the parent carries on business |
| Dependent agent PE | A person in India who habitually exercises authority to conclude contracts on behalf of the parent (Article 5) |
| Service PE | Services furnished in India through the parent's employees or other personnel for more than 183 days in any 12-month period for the same or a connected project (Article 5, as amended by the 2011 Protocol) |
| Construction PE | A building site or a construction, installation or assembly project continuing for more than 6 months (Article 5) |
| Substantial equipment PE | Operating substantial equipment in India for more than 183 days in any 12-month period (Article 5) |
A subsidiary is not by itself a permanent establishment of its parent. The risk arises when the subsidiary or its staff act in a way that makes them the parent's agent, or when the parent's own employees work from India. Both countries have signed the Multilateral Instrument, which can tighten the agent and fragmentation rules, so we test the current text of Article 5 for each case.
How to reduce PE risk
- Keep the subsidiary's role clear in the intercompany agreement. Decisions to conclude customer contracts should sit with the parent's authorised officers.
- Track the days that Australian employees spend in India and what they do there, against the 183-day service test. See treaty and social security for foreign employees.
- Avoid giving Indian staff authority to negotiate and sign contracts for the parent.
- Review any arrangement with an Employer of Record. See EOR vs subsidiary.
- Document the real economic substance of the subsidiary.
What this means for an Australian parent
- Dividends: dividends from a wholly owned Indian subsidiary are generally non-assessable non-exempt income for an Australian company with a direct voting interest of at least 10% (section 768-5, Income Tax Assessment Act 1997), so the 15% Indian tax is usually a final cost and not creditable.
- Interest, royalties and fees: these are assessable in Australia, and the Indian tax withheld can usually be claimed as a foreign income tax offset (Division 770), subject to the offset cap. Your Australian tax adviser should confirm each stream.
- Request the ATO certificate of residency early (form NAT 75442). It confirms residency for a specific period, so ask for the period you need and renew it as payments continue.
Mistakes to avoid
- Paying the parent before the Tax Residency Certificate and Form 41 are on file.
- Assuming the treaty rate applies automatically.
- Letting Australian executives work from India for long periods without a PE review.
- Giving Indian managers signing authority for the parent's customer contracts.
- Claiming a foreign income tax offset on dividends that are not assessable in Australia.
How AU Corporate handles this
We confirm the right Withholding Tax rate before each payment, collect treaty documents and review permanent establishment exposure.
Related services: Taxation and regulatory services
Official sources
Rules on this page can be verified at the primary sources: Ministry of Corporate Affairs, Reserve Bank of India, Income Tax Department and the GST portal.
Frequently asked questions
What is a DTAA?
A double taxation avoidance agreement. It allocates taxing rights between two countries and can reduce Withholding Tax on cross-border payments.
What does the parent need to claim treaty rates?
An Australian certificate of residency from the ATO (the Tax Residency Certificate), Form 41 (previously Form 10F) and, where asked, a declaration of no permanent establishment in India.
Is an Indian subsidiary a permanent establishment of the Australian parent?
An Indian subsidiary is not a permanent establishment of the Australian parent by itself. The risk arises if the subsidiary acts as the parent's dependent agent, or if the parent's own staff operate from India.
Which section governs Withholding Tax on payments to a non-resident?
Section 393 of the Income-tax Act, 2025 (previously Section 195 of the 1961 Act).
Can the Indian tax be credited in Australia?
It depends on the income. Dividends from a wholly owned Indian subsidiary are generally exempt in Australia, so there is no credit for the Indian tax on them. For interest, royalties and fees that are assessable in Australia, the Indian tax can usually be claimed as a foreign income tax offset under Division 770 of the Income Tax Assessment Act 1997. This should be confirmed with an Australian tax adviser.
What is the India-Australia tax treaty (DTAA)?
The India-Australia tax treaty (DTAA) is an agreement that avoids double taxation between the two countries. It caps source-country withholding on dividends, interest and royalties (Articles 10 to 12) and defines when a permanent establishment exists (Article 5). Claiming its benefits needs a Tax Residency Certificate and treaty details in Form 41 (previously Form 10F).
What is a Tax Residency Certificate and Form 41?
A Tax Residency Certificate shows that the Australian parent is an Australian tax resident, and the ATO issues it as a certificate of residency. Form 41 (previously Form 10F) is the electronic statement of details that the foreign payee gives to claim treaty benefits. Both should be ready before the first payment.
Does the treaty reduce Withholding Tax?
The India-Australia tax treaty can reduce Withholding Tax if the parent is an Australian tax resident and satisfies the conditions, which requires a Tax Residency Certificate and treaty details in Form 41 (previously Form 10F).
What is permanent establishment risk?
A permanent establishment (PE) is a taxable presence of a foreign company in India. It can arise from a fixed place of business, dependent agents who conclude contracts, or staff providing services in India for long enough. A PE exposes the Australian parent's profits to Indian tax.
What Withholding Tax rate applies to payments to the Australian parent?
Withholding Tax on payments from an Indian subsidiary to its Australian parent is 15% on dividends under the India-Australia treaty, 15% on interest, and 15% on royalties and fees for services that make technical knowledge available (10% for equipment royalties). The domestic rate for non-residents is 20% plus surcharge and cess, and the lower rate applies where the treaty conditions are met (Section 393 of the Income-tax Act, 2025, previously Section 195 of the Income-tax Act, 1961).
What are Withholding Tax returns and when are they due?
Withholding Tax deducted on salaries and payments is deposited by the 7th of the following month. Quarterly statements are filed in Form 138 for salaries, Form 140 for resident payments and Form 144 for non-resident payments (previously Forms 24Q, 26Q and 27Q).
How many days of work in India create a permanent establishment under the India-Australia treaty?
Under Article 5 of the India-Australia treaty, as amended in 2013, services furnished in India through employees or other personnel create a permanent establishment if the activities continue for the same or a connected project for more than 183 days in any 12-month period. A building site or a construction, installation or assembly project creates one after more than 6 months. Confirm the current text for your case.
What are the India-Australia treaty withholding rates?
The India-Australia treaty caps Indian withholding at 15% on dividends and on interest, and at 15% on royalties and fees for services that make technical knowledge available (10% for equipment royalties). The treaty rate applies only with an Australian certificate of residency and Form 41 (previously Form 10F).
Related guides
The India-Australia DTAA: Article-by-Article Guide for Australian Companies
The India-Australia double taxation avoidance agreement (DTAA) explained article by article, with India as the source state and Australia as the residence state: tax rates table, permanent establishment, business profits, dividends, interest, royalties, capital gains, employees, relief, MAP and how to claim treaty benefits.
Read the guide →Repatriating Profits to Australia: Dividends, Fees, Royalties, Loans and the Paperwork
How an Australian parent receives money from its Indian subsidiary: dividends, service fees, royalties, loans. Forms 145 and 146, Withholding Tax and DTAA relief.
Read the guide →Transfer Pricing in India: A Guide for Australian Parents and Their Indian Subsidiaries
How transfer pricing works for an Indian subsidiary of an Australian company: arm's length pricing, documentation, Form 48, methods, safe harbour and audits.
Read the guide →Treaty and Social Security for Australian Employees in India: Article 15 and the Social Security Agreement
How the India-Australia DTAA (Article 15) and the India-Australia Social Security Agreement apply to Australian employees working in India: the 183-day rule, Indian tax residency, certificates of coverage, provident fund and superannuation.
Read the guide →Sources
Last updated 15 October 2026. General information only, not legal or tax advice. Indian and Australian rules change often; confirm current requirements before acting.