The India-Germany Tax Treaty (DTAA), Article by Article: India as Source State, Germany as Residence State

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Key facts

How the treaty works, and who can use it

A treaty limits the tax a country can charge and allocates taxing rights between the source state, where the income arises (India, for Indian dividends, fees and gains), and the residence state, where the recipient is resident (Germany). The Indian payer applies the reduced rate under Section 393 of the Income-tax Act, 2025 when the German recipient proves residence and beneficial ownership.

• Resident: the German company must be a German tax resident and hold a certificate of residence from its tax office (Finanzamt).
• Beneficial owner: the recipient must own the income, not pass it on as a conduit.
• Flat rate: because the treaty gives 10% on dividends, interest, royalties and technical fees, an intermediate holding company in a third country rarely improves the withholding position.
• Domestic comparison: Indian domestic Withholding Tax on these payments to a non-resident is typically about 20% plus surcharge and cess, so the treaty rate is normally a saving.
• Anti-avoidance: India's domestic GAAR applies from 1 April 2017 where the tax benefit exceeds INR 3 crore.

Tax rates table: what India can charge a German resident

Article by article

Article numbers follow the secondary summaries we checked. Confirm each against the consolidated treaty text before citing it in a filing or a notice reply.

• Taxes covered: in India, income tax with any surcharge; in Germany, income tax, corporation tax, trade tax and the solidarity surcharge.
• Residence: a company is resident where it is liable to tax by reason of domicile, residence, management or similar criteria; dual residents are placed by agreement.
• Article 5, permanent establishment: a fixed place of business such as a branch, office, factory or workshop; a building site, construction or installation project lasting more than six months, including connected supervision; and a dependent agent who habitually concludes contracts. A purchasing office or a stock held only for delivery does not create one.
• No services PE clause: the summaries we checked say the treaty has no day-count services PE test. That does not make German staff safe: a fixed place at their disposal in India, or a dependent agent, can still create a PE. A blog we read suggested a seven-month risk and a 183-day guide; those figures are not in any treaty text we saw.
• Article 7, business profits: taxable only in Germany unless the parent carries on business in India through a PE, and then only the profit attributable to that PE.
• Associated enterprises: where parent and subsidiary deal on non-arm's-length terms, either state may adjust profits. See transfer pricing.
• Article 10, dividends: 10%, see the table.
• Article 11, interest: 10%, with the reported public-lender and Hermes exemptions.
• Article 12, royalties and technical fees: 10% each. Whether a service is a technical fee depends on the definition; services that are not fees for technical services are business profits and are taxed in India only if there is a PE.
• Article 13, capital gains: see the gains section.
• Article 14, independent personal services: taxable in India if the person has a fixed base there, or, as one summary says, stays in India for 120 days or more in the fiscal year.
• Article 15, dependent personal services: employees are taxable in India on work done there unless they are present for 183 days or fewer in the fiscal year, are paid by an employer that is not resident in India and the cost is not borne by an Indian PE. See the employees guide.
• Directors' fees: taxable in the state where the paying company is resident, so India for an Indian subsidiary.
• Article 23, relief from double tax: Germany relieves Indian tax by credit or exemption depending on the income, and domestic law adds a 95% exemption for qualifying dividends and share gains of corporations. India relieves under its domestic law.
• Article 25, mutual agreement procedure: a case may be presented within three years of the first notification of the action. The EU Arbitration Convention does not apply to India.
• Exchange of information: both countries exchange information under the treaty and under their wider agreements.

Gains on shares: an open point to confirm

This is the article where the sources we checked disagree, and it matters most at exit. One treaty summary says gains from the sale of shares in a company resident in a contracting state may be taxed in that state, so India could tax a German seller of Indian shares at domestic rates, with Germany giving relief. A second summary says shares are taxable only in the seller's state of residence, with India taxing only where more than half the value comes from Indian immovable property. The texts cannot both be right.

• Before any sale or reorganisation: have your Indian adviser confirm Article 13 against the consolidated text and any Indian court decisions.
• Model both outcomes: India at 12.5% (plus surcharge and cess) on unlisted shares held more than 24 months, against nil in India.
• Indirect transfers: India's rules on indirect transfers may be raised against a sale of a holding company that derives value from India, whichever way Article 13 reads.
• Germany: a sale of shares by a GmbH is largely exempt at corporate level (95%) under domestic law, so the German cost is small; the Indian cost decides.

See selling, restructuring or closing for the exit steps.

How to claim treaty rates: the paperwork

1. Obtain a certificate of residence for the German company from its tax office, for each relevant year.
2. Prepare Form 41 (previously Form 10F) with identity, residence, period and tax identification details.
3. Prepare a no-PE declaration and a beneficial-ownership declaration signed by a Geschäftsführer.
4. Send the set to the Indian payer before the first payment. The payer withholds at the treaty rate under Section 393.
5. The payer files Form 145 (previously Form 15CA) and, where required, a Chartered Accountant's Form 146 (previously Form 15CB).
6. The German parent keeps the Indian TDS certificate for its German return and any credit.

Permanent establishment: where German groups get caught

• Fixed place: an office, a desk or a workshop in the Indian subsidiary's premises that is at the disposal of German staff can be argued to be a fixed place of the parent.
• Construction and installation: projects above six months, with supervision counted in. German plant builders and machine installers should track project time by site.
• Dependent agent: a German manager who negotiates and signs Indian contracts can create an agency PE.
• Document who directs the work: Indian staff taking daily instructions from Germany can be argued to be a disguised PE.
• Use a services agreement with a cost-plus charge so profit for the work stays where it should.

If a PE arises, India taxes its profits as those of a foreign company (35% plus surcharge and cess) and the German parent files an Indian return.

Official sources

Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Federal Central Tax Office (BZSt), Handelsregister and the Deutsche Bundesbank.

Frequently asked questions

Related guides

Sources

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Last updated 26 October 2026. General information only, not legal or tax advice. Indian and German rules change often; confirm current requirements before acting.