- Dividends: 15% if the US company holds at least 10% of voting stock, otherwise 25%.
- Interest: 10% on loans from banks and financial institutions, 15% otherwise.
- Royalties and fees for included services: generally 15% (10% for certain equipment royalties).
- To claim it: a US tax residency certificate (IRS Form 6166) and India’s Form 41.
What the India–US DTAA does
The India–US Double Taxation Avoidance Agreement (the 1989 Convention) decides which country may tax each type of cross-border income, caps the tax the source country can withhold, and requires the residence country to give credit for tax already paid. It is the reason a dividend from your Delaware company, or a service fee from a US client, doesn’t have to be taxed twice in full.
Treaty rates at a glance
Maximum tax the source country can withhold under the treaty (domestic law may be lower; where the treaty rate is higher than domestic law, you pay the lower):
| Income | Treaty article | Maximum source-country rate |
|---|---|---|
| Dividends — company holding at least 10% of voting stock | Article 10 | 15% |
| Dividends — all other cases | Article 10 | 25% |
| Interest — loans from banks / financial institutions | Article 11 | 10% |
| Interest — other cases | Article 11 | 15% |
| Royalties for use of industrial, commercial or scientific equipment, and related services | Article 12 | 10% |
| Other royalties and fees for included services | Article 12 | 15% |
| Business profits without a permanent establishment in the other country | Article 7 | Not taxable in the source country |
Fees for services — the tricky one
The India–US treaty doesn’t tax every technical fee at source. “Fees for included services” covers services that are ancillary to a royalty, or that make available technical knowledge, skills, know-how or processes to the payer so they can use it themselves. Routine services that don’t transfer that capability — many consulting, marketing or support services — may instead be business profits, taxable in the source country only if there’s a permanent establishment. Getting this characterisation right is often the difference between 15% withholding and none.
Claiming treaty rates
When a US payer pays an Indian person or company
- Give the US payer Form W-8BEN-E (entities) or W-8BEN (individuals), claiming treaty benefits under the relevant article — see how to fill W-8BEN-E.
- Without it, US payers generally withhold at the full 30% statutory rate on US-source fixed income such as dividends or royalties.
When an Indian payer pays a US person or company
- The US recipient provides a Tax Residency Certificate (for US residents, typically IRS Form 6166) and the self-declaration India requires (Form 10F, filed electronically).
- The Indian payer applies the lower of the domestic or treaty rate, and completes the remittance documentation with its bank and chartered accountant.
Foreign tax credit in India
An Indian resident taxed in the US on income that India also taxes can claim a foreign tax credit in India, limited to the Indian tax on that income. The claim requires a prescribed statement, with your return filed on time:
- Form 67 for foreign income up to FY 2025-26 — by the end of the relevant assessment year.
- Form 44 under the Income-tax Rules, 2026 for income from 1 April 2026 — within 12 months from the end of the tax year; a foreign tax identification number is mandatory.
Keep proof of US tax paid — US returns, withholding statements or Form 1042-S.
2026: India’s new Income-tax Act
From 1 April 2026, the Income-tax Act, 2025 and Income-tax Rules, 2026 replaced the 1961 Act, and many forms were renumbered. For cross-border payments this matters in practice: remittance documentation formerly done in Forms 15CA/15CB now uses Forms 145/146 for payments on or after 1 April 2026, and the transfer-pricing accountant’s report formerly in Form 3CEB is now Form 48. The India–US treaty itself is unchanged.
Founder scenarios
- Your Delaware C-Corp pays you a dividend: US withholding applies (25% for an individual shareholder under the treaty, if you give a W-8BEN); you pay Indian tax on the dividend and claim credit for the US tax. See C-Corp vs LLC.
- Your Indian company sells software services to US clients: usually business profits taxable only in India if you have no US permanent establishment — give clients a W-8BEN-E.
- Your US subsidiary pays the Indian parent for development work: priced at arm’s length and documented for transfer pricing. See US subsidiary of an Indian company.
- You own a US LLC: the US may ignore the LLC while India treats it as a separate company, which can complicate treaty access and credits. See ODI & tax rules for US companies.
Are you the foreign side of the payment? Read Form 41, TRC and the no-PE declaration.
Frequently asked questions
What is the dividend tax rate under the India–US DTAA?
How do I claim India–US treaty rates on payments from US clients?
Which form is used to claim foreign tax credit in India?
Did India's new Income-tax Act change the India–US DTAA?
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.