Agreement for
avoidance of double taxation of income with USA
Whereas the annexed Convention between the Government of the
United States of America and the Government of the Republic of India for the
avoidance of double taxation and the prevention of fiscal evasion with respect
to taxes on income has entered into force on the 18th December, 1990 after the
notification by both the Contracting States to each other of the completion of
the procedures required under their laws for bringing into force of the said
Convention in accordance with paragraph 1 of Article 30 of the said Convention
;
Now, therefore, in exercise of the powers conferred by section
90 of the Income-tax 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.
Further in exercise of the powers conferred by section 44A(b) of
the Wealth-tax Act, 1957 (27 of 1957) and section 44(b) of the Gift-tax Act,
1958 (18 of 1958), the Central Government also directs that the provisions of
Article 28 of the said Convention shall be given effect to in the Union of
India.
Notification: No. GSR 992(E), dated
20-12-1990 *.
ANNEXURE
CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF
AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF INDIA FOR THE AVOIDANCE OF DOUBLE
TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
The
Government of the United States of America and the Government of the Republic
of India, desiring to conclude a Convention for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income,
have agreed as follows :
* For earlier Limited
Agreement see GSR 626(E), dated 15-6-1989.
See also Instruction No. 2/2003, dated
28-4-2003 and No. 10/2007, dated 23-10-2007.
ARTICLE 1
GENERAL SCOPE
1. This Convention
shall apply to persons who are residents of one or both of the Contracting
States, except as otherwise provided in the Convention.
2. The Convention
shall not restrict in any manner any exclusion, exemption, deduction, credit,
or other allowance now or hereafter accorded:
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(a) |
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by the laws of either Contracting State ; or |
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(b) |
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by any other agreement between the Contracting States. |
3. Notwithstanding
any provision of the Convention except paragraph 4, a Contracting State may tax
its residents [as determined under Article 4 (Residence)], and by reason of
citizenship may tax its citizens, as if the Convention had not come into
effect. For this purpose, the term "citizen" shall include a former
citizen whose loss of citizenship had as one of its principal purposes the
avoidance of tax, but only for a period of 10 years following such loss.
4. The provisions
of paragraph 3 shall not affect—
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(a) |
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the benefits conferred by a Contracting State under
paragraph 2 of Article 9 (Associated Enterprises), under paragraphs 2 and 6
of Article 20 (Private Pensions, Annuities, Alimony, and Child Support), and
under Articles 25 (Relief from Double Taxation), 26 (Non-Discrimination), and
27 (Mutual Agreement Procedure) ; and |
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(b) |
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the benefits conferred by a Contracting State under
Articles 19 (Remuneration and Pensions in respect of Government Service), 21
(Payment received by Students and Apprentices), 22 (Payments received by
Professors, Teachers and Research Scholars) and 29 (Diplomatic Agents and
Consular Officers), upon individuals who are neither citizens of, nor have
immigrant status in, that State. |
ARTICLE 2
TAXES COVERED
1. The existing
taxes to which this Convention shall apply are :
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(a) |
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in the United States, the Federal income taxes imposed by
the Internal Revenue Code (but excluding the accumulated earnings tax, the
personal holding company tax, and social security taxes), and the exercise
taxes imposed on insurance premiums paid to foreign insurers and with respect
to private foundations (hereinafter referred to as "United States
Tax"); provided, however, the Convention shall apply to the exercise
taxes imposed on insurance premiums paid to foreign insurers only to the
extent that the risks covered by such premiums are not reinsured with a
person not entitled to exemption from such taxes under this or any other
Convention which applies to these taxes ; and |
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(b) |
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in India : |
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(i ) |
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the income-tax including any surcharge thereon, but
excluding income-tax on undistributed income of companies, imposed under the
Income-tax Act ; and |
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(ii ) |
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the surtax |
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(hereinafter referred to as "Indian tax"). |
Taxes
referred to in (a) and (b) above shall not include any amount
payable in respect of any default or omission in relation to the above taxes or
which represent a penalty imposed relating to those taxes.
2. The Convention
shall apply also to any identical or substantially similar taxes which are
imposed after the date of signature of the Convention in addition to, or in
place of, the existing taxes. The competent authorities of the Contracting
States shall notify each other of any significant changes which have been made
in their respective taxation laws and of any official published material
concerning the application of the Convention.
ARTICLE 3
GENERAL DEFINITIONS
1. In this
Convention, unless the context otherwise requires:
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(a) |
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the term "India" means the territory of India
and includes the territorial sea and air space above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdictions, according to the Indian law and in accordance with
inter-national law ; |
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(b) |
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the term "United States", when used in a
geographical sense means all the territory of the United States of America,
including its territorial sea, in which the laws relating to United States
tax are in force, and all the area beyond its territorial sea, including the
sea bed and subsoil thereof, over which the United States has jurisdiction in
accordance with international law and in which the laws relating to United
States tax are in force ; |
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(c) |
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the terms "a Contracting State" and "the
other Contracting State" mean India or the United States as the context
requires ; |
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(d) |
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the term "tax" means Indian tax or United States
tax, as the context requires ; |
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(e) |
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the term "person" includes an individual, an
estate, a trust, a partnership, a company, any other body of persons, or
other taxable entity ; |
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(f) |
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the term "company" means any body corporate or
any entity which is treated as a company or body corporate for tax purposes ; |
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(g) |
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the terms "enterprise of a Contracting State"
and "enterprise of the other Contracting State" mean respectively
an enterprise carried on by a resident of a Contracting State and an
enterprise carried on by a resident of the other Contracting State ; |
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(h) |
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the term "competent authority" means, in the
case of India, the Central Government in the Ministry of Finance (Department
of Revenue) or their authorised representative, and in the case of the United
States, the Secretary of the Treasury or his delegate ; |
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(i) |
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the term "national" means any individual
possessing the nationality or citizenship of a Contracting State ; |
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(j) |
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the term "international traffic" means any
transport by a ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft is operated solely between places
within the other Contracting State ; |
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(k) |
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the term "taxable year" in relation to Indian
tax means "previous year" as defined in the Income-tax Act, 1961. |
2. As regards the
application of the Convention by a Contracting State any term not defined
therein shall, unless the context otherwise requires or the competent
authorities agree to a common meaning pursuant to the provisions of Article 27
(Mutual Agreement Procedure), have the meaning which it has under the laws of
that State concerning the taxes to which the Convention applies.
ARTICLE
4
RESIDENCE
1. For the purposes
of this Convention, the term "resident of a Contracting State" means
any person who, under the laws of that State, is liable to tax therein by
reason of his domicile, residence, citizenship, place of management, place of
incorporation, or any other criterion of a similar nature, provided, however,
that
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(a) |
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this term does not include any person who is liable to tax
in that State in respect only of income from sources in that State; and |
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(b) |
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in the case of income derived or paid by a partnership,
estate, or trust, this term applies only to the extent that the income
derived by such partnership, estate, or trust is subject to tax in that State
as the income of a resident, either in its hands or in the hands of its
partners or beneficiaries. |
(2)
Where by reason of the provisions of paragraph 1, an individual is a resident
of both Contracting States, then his status shall be determined as follows :
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(a) |
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