Double Tax Avoidance Treaty India-Singapore

The Double Taxation Avoidance Agreement is a tax accord between two countries to avoid taxing of same income by two countries levying their own tax. Double Taxation unjustly penalizes income flow between the countries and thereby discourages trade & commerce between the countries.

To mitigate the above problem and to reduce the overall burden of a taxpayer, Singapore & India signed the DTA. Pursuant to the signing of the agreement, any income taxable in both the countries will be taxable only in one country according to the terms of the DTA

Applicability: – Legal Entities & Individuals of the signing countries India & Singapore

Country Taxes Covered
  • Income Tax including any surcharge
  • Capital Gain Tax
  • Income Tax
  • Capital Gain Tax

Key Provisions of India & Singapore DTA

Nature Tax Treatment
Business Profit Singapore based business has a permanent establishment in India, the profit attributable to the permanent establishment will be taxed only in India.
Interest 10% of the Gross Amount, if interest is on Bank Loan

15% of the Gross Amount in all other cases

Dividend Prior to April 1 2020, Companies in India paying dividend bears Dividend Distribution Tax of 15% plus Surcharge wherein recipient is exempt from any tax on dividend. However, from April 1, 2020, India has abolished DDT and the dividend will be taxed in recipient’s hand. Tax Rate is 10% for Indian Shareholders & 20% for Foreign Shareholders

In Singapore, dividends are tax free both by company & recipient shareholder

India-Singapore DTA states below treatment of tax on dividend income: –

  • Tax rate is 10% if the recipient company holds minimum of 25% of the shares of the company paying dividend
  • Tax rate 15% in all the other cases
Royalty Tax rate for Royalty is 10% to 15% depending on the kind of royalty paid to non- residents
Capital Gain Tax on Sale of Shares
  • Shares acquired prior to April 1 2017, Rate of Tax is 100% of the Capital Gain Tax Rate in the country where the investor resides
  • Shares acquired between April 1, 2017 to 31 Mar 2019, Rate of Tax is 50% of the Capital Gain Tax Rate in the country where the company is tax-resident
  • Shares acquired after 31 Mar 2019, Rate of Tax is 100% of the Capital Gain Tax Rate in the country where the company is tax-resident

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Chennai, Tamil Nadu, IN
Member Since: 27 Jun 2020 | Total Posts: 4

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One Comment

  1. AJAY K says:

    What if an Indian resident invest in a Singapore company. As per article 13 , it will be taxed in the Singapore @0 rate. Does it mean for Indian resident there is no capital gain tax in India for sale of shares of a Singapore company

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March 2021