The India-China treaty was signed in New Delhi on 18 July 1994 and entered into force in November 1994. Read with India as the source state and China as the residence state, it caps Indian tax on dividends, interest, royalties and fees for technical services at 10% of the gross amount, taxes business profits in India only if the Chinese company has a permanent establishment there, and allows China to give credit for the Indian tax. Protocols, including one signed on 26 November 2018, updated the exchange of information and other provisions. Confirm the current consolidated text and the effect of the Multilateral Instrument before you rely on any clause.
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Key facts
| Signed / in force | 18 July 1994 (New Delhi) / November 1994 |
|---|---|
| Protocols | 26 November 2018 (exchange of information, with later amendments reported); confirm the current consolidated text |
| Dividends | 10% of the gross amount |
| Interest | 10%; exempt in the source state for specified government bodies, central banks and wholly state-owned financial institutions, as reported |
| Royalties and fees for technical services | 10% (Article 12); fees cover managerial, technical or consultancy services |
| Permanent establishment | Fixed place; building site or installation project and services through employees over 183 days, as reported |
| Business profits | Taxed in India only to the extent attributable to a PE |
| Claim documents | Chinese tax residence certificate, Form 41, no-PE declaration and, where needed, beneficial ownership evidence |
Tax rates table
| Article | Income | Treaty rate on payments from India to China | Indian domestic position for comparison |
|---|---|---|---|
| Article 10 | Dividends | 10% of the gross amount | About 20% plus surcharge and cess for a non-resident company |
| Article 11 | Interest | 10%; exemptions for specified government and central bank lenders | About 20% plus surcharge and cess; ECB cost limits also apply |
| Article 12 | Royalties | 10% of the gross amount | Domestic rate under Section 393 of the Income-tax Act, 2025; confirm the current rate |
| Article 12 | Fees for technical services | 10% of the gross amount (managerial, technical or consultancy services) | Domestic rate under Section 393; confirm the current rate |
| Article 7 | Business profits without a PE | Not taxable in India | Taxable in India if business connection, subject to the treaty |
| Article 7 | Business profits of a PE | Taxed in India on profits attributable to the PE | About 35% plus surcharge and cess for a foreign company |
| Article 13 | Capital gains | See the share-gains note below | 12.5% for unlisted shares held more than 24 months |
| Article 14 | Independent professional services | Not taxable in India without a fixed base or 183 days' stay | Taxable under the Act |
| Article 15 | Salary of a Chinese resident | Not taxable in India for up to 183 days if three conditions are met | Taxable on work done in India |
Permanent establishment (Article 5)
- Fixed place: a place of management, branch, office, factory or workshop is a PE, along with mines and other places of extraction.
- Building site or installation project: a PE if it lasts more than 183 days, with aggregation rules for connected periods, according to the protocol summaries.
- Services PE: furnishing services through employees or other personnel in India for more than 183 days (within a fiscal year, as reported) can create a PE. Technical services are treated separately under Article 12. Check the exact text before relying on the reading.
- Agent PE: a dependent agent who habitually concludes contracts for the Chinese company can create a PE; an independent agent acting in the ordinary course does not.
- Subsidiary: an Indian subsidiary is a separate entity and is not a PE of the parent by itself, but it becomes one if it is a fixed place of the parent or acts as a dependent agent.
- Delivery of goods: reported to have been removed from the PE definition by the protocol, which narrows the exceptions.
Business profits and the Indian subsidiary
An Indian private limited company owned by a Chinese parent pays Indian tax on its own profits. The treaty matters for what the parent receives and for any activity the parent carries out in India itself. Profits of a PE are taxed in India after deducting expenses for the PE. Charges between parent and subsidiary must pass transfer pricing. See transfer pricing.
Share gains and other income
- Secondary sources describe Article 13 differently: some say gains on property other than immovable property are taxed where the seller resides, while others say India may tax gains on shares of an Indian company. Obtain the treaty text and have your adviser confirm the reading before pricing an exit.
- Domestic law taxes a non-resident's long-term gain on unlisted Indian shares at 12.5% (held more than 24 months) and short-term gain at the normal rate.
- Interest and royalties are covered by Articles 11 and 12 above. Directors' fees and artistes and sportspersons have their own articles.
- Pensions and government service have separate rules.
Employment income (Article 15)
A Chinese resident working in India is taxable only in China if the stay is 183 days or less in the relevant period, the pay is from an employer who is not an Indian resident, and the cost is not borne by a PE in India. A secondee whose cost is borne by the Indian subsidiary normally fails the second and third tests. See Chinese employees in India.
Relief from double taxation (Article 23)
China gives its resident a credit for Indian tax paid on income taxable in India under the treaty, capped by the Chinese tax on that income. Sources differ on the method India itself applies for Indian residents. The practical point for a Chinese parent is to keep the Indian Withholding Tax certificate, the tax payment evidence and the Indian tax return so that the credit can be claimed in China. A Chinese adviser must confirm the credit mechanics for dividends, including indirect credit for qualifying holdings.
How to claim treaty rates
- The Chinese company obtains a certificate of tax residence from the Chinese tax authority.
- It gives the Indian payer Form 41 (previously Form 10F), the residence certificate and a declaration of no permanent establishment in India.
- It confirms it is the beneficial owner of the income.
- The Indian payer deducts Withholding Tax at the treaty rate under Section 393 of the Income-tax Act, 2025, and deposits it by the 7th of the following month.
- The payer issues the certificate for the Chinese credit claim. Keep it with the Chinese tax return papers.
Anti-abuse rules
- Secondary summaries say the protocol added a test of whether claiming treaty benefits is consistent with the treaty's object and purpose. Have your adviser confirm how this works with the Multilateral Instrument.
- India's General Anti-Avoidance Rule applies to arrangements whose main purpose is a tax benefit above INR 3 crore.
- A holding company in a third country needs real substance. A Chinese parent with a Hong Kong or Singapore intermediate holding also has to clear Press Note 3. See Press Note 3
Disputes and information exchange
The treaty provides for a mutual agreement procedure between the competent authorities and for exchange of information. File a case within the time limit in the treaty text and as soon as an adjustment is notified. Indian authorities may share information about payments and accounts with China under the exchange of information article.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, MOFCOM (China), SAFE (China) and the Ministry of External Affairs (India).
Frequently asked questions
Is there a tax treaty between India and China?
Yes. It was signed on 18 July 1994 and came into force in November 1994, and has been amended by protocols, including one signed on 26 November 2018.
What is the Indian withholding rate on dividends paid to a Chinese parent under the treaty?
10% of the gross amount, on receipt of the Chinese tax residence certificate, Form 41 and other declarations.
What is the treaty rate on royalties and technical fees?
10% of the gross amount under Article 12, where the Chinese company is the beneficial owner and has no PE in India connected with the payment.
When does a Chinese company have a permanent establishment in India?
Through a fixed place of business, a building site or installation project over 183 days, services through personnel for more than 183 days in a year, or a dependent agent who concludes contracts. Confirm the exact text for your facts.
Who gives relief from double tax?
China gives a credit for Indian tax paid on income taxable in India under the treaty, subject to Chinese rules and limits. Keep the Withholding Tax certificate.
Does the treaty exempt share gains?
Sources differ on Article 13. Domestic law taxes long-term gains on unlisted shares at 12.5%. Confirm the treaty position with the official text before planning an exit.
Do I need a certificate from the Chinese tax office?
Yes. A certificate of tax residence is the basic document for the treaty claim, together with Form 41 and a no-PE declaration.
Does Press Note 3 apply even though a treaty exists?
Yes. The treaty deals with tax. Press Note 3 is a separate foreign investment approval rule and applies whatever the treaty says.
Where can I read the treaty text?
On the Income Tax Department of India website under tax treaties, and the Chinese State Taxation Administration site. Use the consolidated version with all protocols.
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Read the guide →Transfer Pricing Between a Chinese Parent and an Indian Subsidiary: Pricing Components, Equipment and Technology
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Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and Chinese rules change often; confirm current requirements before acting.