Canada–India Tax Treaty Summary

📌 Scope & Definitions

Article 1 — General Scope

• Applies to residents of one or both of Canada and India

• Does not restrict exemptions, deductions, or credits available under domestic law or other agreements

• Saving clause: each State may tax its own residents as if the Convention had not come into effect

Article 2 — Taxes Covered

• Canada: income taxes imposed by the Government of Canada under the Income Tax Act

• India: income tax including surcharge under the Income-tax Act (excluding tax on undistributed income of companies); surtax

• Applies to any substantially similar future taxes enacted by either country

Article 3 — General Definitions

• Defines: Canada, India, person, company, competent authority, national, international traffic, taxable year

• Canada's competent authority: Minister of National Revenue or authorised representative

• India's competent authority: Central Government, Ministry of Finance (Department of Revenue)

• Undefined terms carry their respective domestic-law meaning

📌 Residence & Permanent Establishment

Article 4 — Residence

• A person is a resident if liable to tax by reason of domicile, residence, place of management, or similar criteria

• Dual-residency tie-breakers for individuals applied in order: (1) permanent home, (2) centre of vital interests, (3) habitual abode, (4) nationality, (5) mutual agreement

• For companies: resident in the State where place of effective management is situated

Article 5 — Permanent Establishment (PE)

• PE = fixed place of business: place of management, branch, office, factory, workshop, mine, oil/gas well, quarry

• Building site, construction, or assembly project = PE if it continues for more than 6 months

• Service PE: furnishing of services through employees = PE if activities continue for more than 6 months within any 12-month period

• Dependent agent with authority to conclude contracts = PE

• Preparatory or auxiliary activities do not create a PE

• Independent broker or agent acting in the ordinary course of business does not create a PE

📌 Business & Property Income

Article 6 — Income from Immovable Property

• Income from real property situated in the other State may be taxed in the situs State

• Covers agriculture, forestry, direct use, letting, and all other forms of use of immovable property

• Applies to income from immovable property of an enterprise and from property used for independent personal services

Article 7 — Business Profits

• Taxable only in the residence State unless a PE exists in the other State

• If PE exists, the other State may tax profits attributable to the PE on an arm's-length, separate-entity basis

• Deductions allowed for executive, general administrative, and other expenses incurred for the PE

• No profits attributed to a PE solely from purchasing goods for the enterprise

Article 8 — Shipping and Air Transport

• Profits from ships or aircraft in international traffic: taxable only in the residence State

• Covers transportation of passengers, mail, livestock, and goods; related activities

• Gains from alienation of ships or aircraft used in international traffic: taxable only in the residence State

Article 9 — Associated Enterprises (Transfer Pricing)

• Each State may adjust income where related-party transactions are not at arm's length

• Where one State makes an upward adjustment, the other State shall make a corresponding downward adjustment

📌 Passive Income — Withholding Rates

Article 10 — Dividends

• Direct investment (beneficial owner holds ≥25% voting stock): 15%

• All other cases (portfolio): 25%

• Dividends attributable to a PE in the source State: taxed under Business Profits (Article 7)

Article 11 — Interest

• General rate: 15%

• Fully exempt (0%) if derived and beneficially owned by the Government, political subdivision, or central bank of the other State

• Excess interest arising from a special relationship between payer and recipient taxed under domestic law

Article 12 — Royalties

• Royalties paid for use of copyright, patent, trademark, design, secret formula, or industrial, commercial, or scientific equipment: 15%

• Payments for technical services or information concerning industrial, commercial, or scientific experience (know-how): 15%

• Royalties attributable to a PE: taxed under Article 7

📌 Capital Gains

Article 13 — Gains

• Gains from alienation of immovable property: taxable in the situs State

• Gains from alienation of shares deriving more than 50% of their value from immovable property: taxable in the situs State

• Gains from alienation of ships or aircraft in international traffic: taxable only in the residence State

• Other gains: generally taxable only in the residence State, subject to domestic law provisions

📌 Personal Services

Article 15 — Independent Personal Services

• Taxable in the residence State

• Also taxable in the source State if the individual has a fixed base regularly available in that State, or is present for more than 90 days in any 12-month period

Article 16 — Dependent Personal Services (Employment Income)

• Taxable only in the residence State unless work is performed in the other State

• Exemption from source-State tax if:

  • Individual is present for ≤183 days in a 12-month period, AND

  • Remuneration is paid by an employer who is not a resident of the source State, AND

  • Remuneration is not borne by a PE in the source State

Article 17 — Directors' Fees

• Directors' fees derived by a resident of one State from a company resident in the other State may be taxed in the source State

Article 18 — Entertainers and Athletes

• Income derived by entertainers and athletes from activities performed in the other State may be taxed in the State of performance

• Applies regardless of Articles 15 and 16

📌 Government Service, Pensions & Education

Article 19 — Government Service

• Salaries paid by a State to an individual for services rendered to that State: taxable only in the paying State

• Exception: taxable only in the other State if the individual is a resident and national of that other State

Article 20 — Pensions and Annuities

• Private pensions and annuities derived by a resident of one State from sources in the other State: taxable in both States, but source-State tax limited to 25% of the gross amount

• Social security benefits: taxable only in the paying State

Article 21 — Students and Apprentices

• A student or business apprentice present in the host State principally for education or training is exempt from tax in the host State on payments from abroad for maintenance, education, or training

Article 22 — Professors and Teachers

• A professor or teacher who visits the other State for up to 2 years for teaching or research at a recognised institution is exempt from tax in the host State on remuneration for such activities

📌 Other Income

Article 23 — Other Income

• Income not covered elsewhere: taxable only in the residence State

• Exception: if the income arises in the other State, that State may also tax it

📌 Relief from Double Taxation

Article 24 — Relief from Double Taxation

• Canada: provides a foreign tax credit for Indian taxes paid on income from Indian sources

• India: provides a credit for Canadian taxes paid on income from Canadian sources

• Exempted income may still be taken into account in determining the applicable rate on remaining income (exemption with progression)

📌 Non-Discrimination & Procedure

Article 25 — Non-Discrimination

• Nationals of one State shall not be subjected to more burdensome taxation in the other State than nationals of that other State in the same circumstances

• PE of an enterprise of one State shall not be taxed less favourably than enterprises of the other State carrying on the same activities

Article 26 — Mutual Agreement Procedure (MAP)

• Residents may present cases to the competent authority within 3 years of first notification of taxation not in accordance with the Convention

• Competent authorities shall endeavour to resolve disputes by mutual agreement

• Competent authorities may communicate directly, including through a joint commission

Article 27 — Exchange of Information

• Competent authorities shall exchange information necessary for carrying out the Convention and domestic tax laws

• Information received shall be treated as confidential and disclosed only to persons involved in tax administration

📌 Entry into Force & Termination

Article 28 — Entry into Force

• Signed: 11 January 1996 · Entered into force: 6 May 1997

• Effective for withholding taxes: income arising on or after 1 January 1997

• Effective for other taxes: taxable years beginning on or after 1 January 1997

Article 29 — Termination

• Convention remains in force indefinitely

• Either State may terminate by giving written notice on or before 30 June of any calendar year; Convention ceases to have effect from 1 January of the following year

This summary is for general reference only. Always consult the full Convention text and any related Protocols for authoritative guidance. Rates shown are maximum treaty rates; lower domestic rates take precedence.