The India-US treaty has one clause that decides most disputes.

Dividends are capped at 15% where the US recipient is a company holding at least 10% of the voting stock of the Indian payer, and 25% in other cases. Interest is capped at 10% where the beneficial owner is a bank or financial institution, and 15% otherwise. Royalties and fees for included services are capped at 10% for equipment royalties and services ancillary to them, and 15% for other royalties and other included services. All of these are ceilings on what India may charge, not rates that apply automatically — the domestic rate applies until the treaty is properly claimed.

It is the condition in Article 12 that turns an ordinary service fee into a taxable included service. A technical or consultancy service is only caught where it makes technical knowledge, experience, skill, know-how or processes available to the person paying for it — that is, where the payer is enabled to apply the knowledge independently afterwards. A consultant who performs an analysis and hands over a report has usually not made anything available; a consultant who trains your team to perform that analysis themselves probably has. It matters enormously because India's domestic definition of fees for technical services has no such condition, so a payment can be fully taxable under domestic law and not taxable at all under the treaty.

Often not, though Indian revenue authorities have argued otherwise for two decades. The distinction that matters is between paying for the right to use a copyright — to reproduce, adapt or commercially exploit the software — and paying for the right to use a copyrighted product, which is what an ordinary licence or a subscription gives you. Where no copyright right passes to the user, the payment is generally business profits rather than royalty, and taxable in India only through a permanent establishment. The position has largely settled in the taxpayer's favour but the characterisation still has to be documented properly in the contract rather than assumed.

It does not have the elaborate limitation-of-benefits article found in some newer treaties, such as the one in the India-Singapore treaty. That does not mean anything goes: the general anti-avoidance provisions of Indian domestic law apply, beneficial ownership has to be real for the reduced rates on dividends, interest and royalties, and an arrangement whose main purpose is obtaining the benefit can be challenged. The absence of a formal article makes the treaty simpler to claim, not immune from scrutiny.

Both, in the first instance, and this is the awkward part of the US treaty relationship. India taxes you as a resident on worldwide income once you meet the day-count tests. The United States taxes you as a citizen on worldwide income wherever you live, which is a feature of US law rather than of the treaty and which the treaty does not remove. Relief comes through the foreign tax credit mechanism in both systems rather than through the treaty allocating the income to one side — and the ordering matters, because claiming the credit in the wrong country first can leave part of it wasted.

The Indian company withholds on the dividend at the treaty rate where the paperwork is in place: 15% if your US company holds at least 10% of the voting stock, 25% otherwise. Without a residency certificate and Form 41 the Indian company must withhold at the domestic rate, and recovering the difference means filing an Indian return. On the US side the dividend is income to the parent, with a foreign tax credit available for the Indian tax — so the real question is usually whether your US rate absorbs the credit or leaves some of it stranded.

Obtain a US residency certificate, file the declaration now known as Form 41, and give both to whoever is paying you in India before they deduct. For rent, interest or capital gains where tax has already been over-deducted, the route is to file an Indian return and claim the refund. In the other direction, the Indian tax you pay is creditable against your US liability, which is claimed on your US return. The two claims are separate exercises with separate deadlines and they are regularly mixed up.

No, and it is a real and often unbudgeted cost. India has totalisation agreements with around twenty countries, but the United States is not among them. An Indian employee posted to the US, or an American posted to India, can be required to contribute to both systems simultaneously with no exemption certificate available — and on a short assignment the contributions in the host country may never vest into any benefit. Unlike the India-UK position, which changed in July 2026, there is no equivalent relief here.

When it has a fixed place of business here through which the business is carried on, or an agent in India who habitually concludes contracts in its name, or — under the service permanent establishment provision — where it furnishes services in India through employees or other personnel for more than the period specified in the treaty. The last of these catches US companies that never set up an office but keep sending people. Where a permanent establishment exists, the US company has an Indian return to file and Indian tax on the profits attributable to it, quite separately from any withholding.

A current US tax residency certificate for the relevant period, the declaration in Form 41 filed electronically, and the payer's own Form 145 for the remittance with an accountant's certificate in Form 146 where required. Where the payer wants certainty in advance, or the characterisation is genuinely arguable, a lower or nil withholding certificate can be applied for rather than withholding at the higher rate and arguing about it afterwards. The single most common failure is the certificate expiring quietly between one remittance and the next.

If it withholds too much, the US recipient can file an Indian return and claim the refund — which works, but ties up the money for a year or more and, depending on the US position, may complicate the foreign tax credit in the meantime. If it withholds too little, the Indian payer is the one exposed: it faces the shortfall, interest, and disallowance of the expense in its own accounts, and it cannot recover the tax from the recipient after the event. That asymmetry is why Indian payers default to the higher rate when the paperwork is not in order.