India–UK DTAA Explained
Dividends, Capital Gains, Royalties and Fees for Technical Services
Yes. India and the UK have a comprehensive double taxation avoidance agreement (DTAA), signed on 25 January 1993 and amended by a protocol in force from 27 December 2013. It caps Indian tax on most dividends paid to UK residents at 10%, against India's 20% domestic rate, and sets rules for royalties, technical fees, capital gains and permanent establishments.
The treaty matters in both directions: for an Indian group building a UK subsidiary of an Indian company, and for a British firm planning to set up a company in India from the UK. This guide explains the rates, the articles behind them and the paperwork needed to claim them.
Key points
The India–UK DTAA dates from 1993, was amended by a 2013 protocol and is modified by the OECD Multilateral Instrument (MLI) from 2020.
Treaty caps on tax in the source country: dividends 10% (15% for certain property investment vehicles), interest 10% or 15%, royalties and fees for technical services 15% (10% for equipment-related payments).
Capital gains are taxed by each country under its own domestic law (Article 14), so the treaty gives little relief on share sales.
To claim treaty rates in India from 1 April 2026 you generally need a UK tax residency certificate and Form 41 (formerly Form 10F) under the Income-tax Act 2025.
A principal purpose test and a limitation of benefits clause can deny relief to arrangements set up mainly for treaty benefits.
Does India have a DTAA with the UK?
Yes. The Convention between the UK and India for the avoidance of double taxation was signed in New Delhi on 25 January 1993 and entered into force on 25 October 1993. A protocol signed in London on 30 October 2012 entered into force on 27 December 2013.
It rewrote the dividends article, deleted the partnerships article, widened exchange of information, and added articles on tax examinations abroad (28A), assistance in collection (28B) and limitation of benefits (28C).
The treaty is also modified by the OECD Multilateral Instrument. HMRC's synthesised text shows the MLI took effect for India from 1 April 2020 and, in the UK, from 1 January 2020 for taxes withheld at source and 1 April 2020 for corporation tax. The most important MLI change is the principal purpose test, discussed below.
You can read the treaty on the Income Tax Department website (incometaxindia.gov.in, under international taxation and DTAAs) and on GOV.UK, which publishes the 1993 convention, the 2013 protocol and the MLI synthesised text.
Two points of context:
India's new Act. From 1 April 2026, the Income-tax Act 2025 replaced the 1961 Act. Treaty relief that sat in section 90 now sits in section 159. The principle is unchanged: a non-resident can apply the treaty or domestic law, whichever is more beneficial.
Trade agreement and social security. The UK–India CETA (in force 15 July 2026) is a trade agreement and does not change the tax treaty. Social security is covered separately by the Double Contributions Convention, also effective 15 July 2026.
Income type | Treaty article | Maximum tax in the source country under the treaty | India domestic rate for non-residents (before surcharge and cess) | UK domestic withholding |
|---|---|---|---|---|
Dividends | Article 11 | 10%; 15% if paid by a tax-exempt property investment vehicle out of property income | 20% (section 207, Income-tax Act 2025) | None on dividends |
Interest | Article 12 | 10% if the beneficial owner is a bank; 15% otherwise; exempt for governments and central banks | 20% generally, with lower rates for certain debt | 20% on yearly interest |
Royalties and fees for technical services | Article 13 | 15%; 10% for payments for the use of industrial, commercial or scientific equipment and related services | 20% (section 207) | 20% on royalties; generally none on service fees |
Capital gains | Article 14 | Each country applies its domestic law | For example 12.5% on long-term gains from unlisted shares held over 24 months | Non-residents generally taxed only on UK land and property-rich entities |
In practice the treaty rate is generally applied as an all-in cap, without surcharge and cess added on top.
What is the dividend withholding rate under the India–UK DTAA?
The rate is 10% of the gross dividend in most cases. Article 11, as replaced by the 2013 protocol, allows 15% only where dividends are paid out of income from immovable property by an investment vehicle that distributes most of that income annually and whose property income is tax-exempt. Article 11(6) also denies relief where a main purpose of creating or assigning the shares was to take advantage of the article.
UK parent, Indian subsidiary. Suppose a Pune engineering subsidiary of a £30m UK group declares a ₹10 crore dividend. Under domestic law, India would withhold 20% plus surcharge and cess.
With a valid UK tax residency certificate, Form 41 and beneficial ownership, the treaty caps Indian tax at 10%, or ₹1 crore. In the UK, most dividends received by companies are exempt from corporation tax under Part 9A of the Corporation Tax Act 2009, so the Indian 10% is generally a final cost rather than a creditable tax.
Indian parent, UK subsidiary. The UK does not withhold tax on dividends, so a UK subsidiary pays its Indian parent gross. The dividend is then taxable in India in the hands of the Indian company under domestic rules. Plan repatriation alongside the UK subsidiary's corporation tax position and India's foreign tax credit rules.
How are royalties and fees for technical services taxed under the India–UK DTAA?
Royalties and fees for technical services (FTS) are capped at 15% in the source country, or 10% for payments for the use of equipment and services ancillary to that use (Article 13). The original treaty set a 20% rate for the first five years for most payers; that period has long expired.
The definition of FTS is narrower than India's domestic definition. Article 13(4) covers technical or consultancy services that are ancillary to a royalty, ancillary to equipment rental, or that "make available" technical knowledge, experience, skill, know-how or processes.
Services that do not transfer that capability to the payer may not be FTS under the treaty. They are then business profits, taxable in India only if the UK company has a permanent establishment there.
Three common situations:
UK parent charging an Indian subsidiary management or support fees. Whether the fee is FTS depends on whether the services make available know-how to the Indian company. Document what is delivered; a generic cost allocation invites challenge.
Indian company paying a UK company for software or SaaS. Following the Supreme Court's 2021 decision in Engineering Analysis Centre of Excellence, payments for the resale or use of off-the-shelf software are generally not royalties under treaties like this one, though each contract needs reading.
UK company paying royalties to an Indian licensor. UK domestic law requires 20% withholding, but a UK payer may apply the 15% or 10% treaty rate directly if it reasonably believes the Indian recipient is entitled to treaty relief (section 911, Income Tax Act 2007).
Intercompany fees must also be at arm's length. See our guides on transfer pricing between an Indian parent and its UK subsidiary and transfer pricing in India for captive centres.
How are capital gains on shares taxed under the India–UK DTAA?
Article 14 lets each country tax capital gains under its own domestic law, apart from gains on ships and aircraft. Unlike India's treaties that give the residence country exclusive rights on share gains, this treaty offers little protection.
UK company selling shares in an Indian company. India can tax the gain. Under current domestic rules, long-term gains on unlisted shares held for more than 24 months are taxed at 12.5% for non-residents on transfers from 23 July 2024; short-term gains are taxed at normal rates.
On the UK side, the substantial shareholding exemption can exempt the gain where the UK company has held at least 10% for a continuous 12 months in the six years before disposal and other conditions are met. If the UK gain is exempt, Indian tax is a real cost with no UK credit to absorb it.
Indian company selling shares in a UK company. The UK generally does not tax non-residents on gains from shares, except UK property-rich companies. India taxes the gain under domestic law, with overseas investment (ODI) rules governing the disposal.
Exit tax belongs in the design stage. A UK–India structure that may be sold in five years should model the Indian tax on exit before the shares are issued.
When does a UK company have a permanent establishment in India (and vice versa)?
A permanent establishment (PE) arises under Article 5 where a company has a fixed place of business in the other country, or meets one of the treaty's specific tests. Once a PE exists, that country can tax the profits attributable to it under Article 7.
The tests that most often catch India–UK groups:
Fixed place: an office, branch or workshop through which the business is carried on.
Service PE (Article 5(2)(k)): furnishing services through employees or other personnel for more than 90 days in any 12-month period, or more than 30 days where the services are for a related enterprise.
Construction or installation, including supervision: projects lasting more than six months.
Dependent agent: a person who habitually concludes contracts, maintains stock or secures orders for the enterprise.
Owning or controlling a subsidiary does not, by itself, make the subsidiary a PE (Article 5(6)).
Typical risks: UK managers spending long periods at an Indian capability centre, or Indian engineers based at UK client sites for months. From 1 January 2026, the UK also updated its own PE rules to follow the latest OECD definitions. Secondment agreements, who directs the work and who bears the cost decide the outcome.
How do you claim treaty relief: TRC, Form 41 and UK forms?
To claim treaty rates in India, a UK resident generally needs a UK tax residency certificate and Form 41, and should give the Indian payer its PAN or the alternative details the rules allow. To claim reduced UK withholding, an Indian resident needs an Indian tax residency certificate and, where required, an HMRC claim form.
Who is claiming | Where relief is claimed | Main documents |
|---|---|---|
UK company receiving Indian dividends, royalties, interest or fees | From the Indian payer at the time of withholding | HMRC certificate of residence (apply online through HMRC's RES1 service); Form 41, formerly Form 10F, under section 159(8) of the Income-tax Act 2025; PAN or prescribed alternative details |
Indian company receiving UK royalties or interest | From the UK payer, or by a claim to HMRC | Indian tax residency certificate (Form 43, formerly Form 10FB); HMRC double taxation treaty claim form where the payer needs a direction |
UK resident taxed in India | UK return, as foreign tax credit relief | Evidence of Indian tax paid; credit limited to the treaty rate |
Indian resident taxed in the UK | Indian return, as foreign tax credit | Foreign tax credit statement in the prescribed form |
Paperwork alone is not enough. Since 2020 the MLI principal purpose test denies a treaty benefit if obtaining it was one of the principal purposes of an arrangement, unless granting it accords with the treaty's object and purpose. Article 28C (limitation of benefits) adds a main purpose test of its own. Our article on the principal purpose test explains how this is applied in practice.
The Greenwolf view
A treaty rate is a consequence of a structure, not a reason for one. Commercial design comes first: what the UK entity does, what the Indian entity does, who carries which risks and where decisions are made. Tax follows functions, risks and substance, and the treaty then tells you how the resulting income is shared between the two countries.
For India–UK groups, we ask five questions before relying on the DTAA:
Which way will cash flow? Service fees, royalties, interest and dividends are each taxed differently. Choose the flow that matches the commercial reality.
Is the recipient the beneficial owner with real substance? A holding layer with no people will struggle under the principal purpose test.
Will anyone create a PE? Map who travels, for how long, and for whom they work.
What happens on exit? Article 14 leaves share gains to domestic law, so model Indian tax on a future sale now.
Are the documents ready before the first payment? The certificate of residence and Form 41 should be in place before the Indian payer withholds.
Planning a move between India and the UK? Read the corridor guide for Indian technology companies expanding to the UK or for UK companies setting up in India, and follow Greenwolf Advisors on LinkedIn for updates on the India–UK corridor.
This article is general information, not advice for a specific case. Rules change; please take advice on your own facts before acting.
Author – Team Greenwolf
10 October, 2026 | 13 Min Read
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