Capital Gains Tax Between India and Norway Under DTAA

Quick answer: Under the India-Norway DTAA (signed 2 February 2011, in force since 20 December 2011), Article 13 allocates capital-gains taxing rights by the type of asset rather than prescribing a single rate. India can tax gains on Indian immovable property (Article 13(1)) and, distinctively, on any shares of an Indian company (Article 13(4)) at full domestic rates -- there is no land-rich carve-out or minimum-holding threshold in this treaty. Gains from ships and aircraft in international traffic are taxable only in the alienator's residence state (Article 13(3)), and all other gains fall to the residual Article 13(5), also taxable only in the residence state. India taxes listed-share LTCG at 12.5% above INR 1.25 lakh, STCG at 20%, and unlisted-share LTCG at 12.5%, with Norway crediting the Indian tax paid.

Key takeaways:

• Article 13 allocates taxing rights by asset type, not a single capital-gains rate
• India can tax gains on shares of an Indian company at any shareholding level -- no land-rich or minimum-holding carve-out
• Ships and aircraft gains are taxed only in the alienator's residence state, not by place of effective management
• Gains from any property not covered by paragraphs 1-4 are taxed only in the alienator's residence state (Article 13(5))
• Listed-share LTCG is 12.5% above INR 1.25 lakh; STCG is 20%; unlisted-share LTCG is 12.5%

Capital Gains Tax Between India and Norway

The India-Norway Double Taxation Avoidance Agreement (DTAA), signed 2 February 2011 and in force since 20 December 2011, sets out capital-gains rules under Article 13. Its provisions took effect in India for fiscal years beginning on or after 1 April 2012, under Article 31(3)(a) and CBDT Notification No. 24/2012 dated 19 June 2012. Unlike dividends, interest, royalties, and FTS, where the treaty caps a withholding rate, Article 13 instead allocates the right to tax between India and Norway according to the nature of the asset sold -- the domestic rate of whichever state wins that allocation then applies.

This distinction matters directly for Norwegian investors disposing of Indian shares -- a common structure given Norway's substantial portfolio and strategic investment in Indian listed and unlisted companies, including through the Government Pension Fund -- and for Indian residents disposing of Norwegian holdings. Article 13 splits gains into five categories: immovable property, PE-connected movable property, ships and aircraft, shares of a resident company, and all other property.

How Article 13 Allocates Taxing Rights

Immovable Property -- Article 13(1)

Gains from Indian immovable property sold by a Norwegian resident may be taxed in India, at domestic rates: 12.5% long-term capital gains (LTCG, held over 24 months) or applicable slab rates for short-term gains. The reverse applies to Norwegian immovable property sold by an Indian resident.

Movable Property Connected to a PE -- Article 13(2)

Gains on movable property forming part of the business property of a permanent establishment (or a fixed base) that a Norwegian enterprise has in India -- including gains from disposing of the PE itself -- may be taxed in India, generally at the 35% corporate rate applicable to a foreign company, plus surcharge and cess.

Ships and Aircraft -- Article 13(3)

Gains from the alienation of ships or aircraft operated in international traffic are taxable only in the Contracting State of which the alienator is a resident -- a residence-based rule, not the place-of-effective-management test some other treaties use for this category. This gives Norwegian and Indian shipping and aviation operators clean, single-state certainty.

Shares -- Article 13(4)

This is the treaty's most commercially significant provision for cross-border investors. Article 13(4) allows gains from the alienation of shares in a company resident in a Contracting State to be taxed in that State -- meaning India may tax a Norwegian resident's gain on shares of an Indian company, and Norway may tax an Indian resident's gain on shares of a Norwegian company. Crucially, Article 13(4) contains no minimum-holding threshold and no separate carve-out for land-rich companies: it reaches every share sale in a resident company, unlike treaties that limit the source state's right to substantial participations or land-rich entities.

India's domestic rates for a non-resident selling Indian shares are 12.5% LTCG on listed shares (gains above INR 1.25 lakh, held over 12 months), 20% STCG on listed shares (held up to 12 months), and 12.5% LTCG on unlisted shares (held over 24 months). Norway generally does not tax non-resident portfolio investors on gains from listed Norwegian shares, though domestic Norwegian rules can apply to substantial holdings or unlisted shares.

Other Property -- Article 13(5)

Gains from any property not covered by paragraphs 1 through 4 -- intellectual property sold outright, business goodwill, partnership interests, and similar assets -- are taxable only in the alienator's state of residence. This residual clause gives exclusive taxing rights to the seller's home state for anything not specifically allocated elsewhere in Article 13.

Who Qualifies for Treaty Protection on Capital Gains

Tax Residency

Treaty protection under Article 13 requires the seller to be a resident of Norway under Article 4 -- liable to tax there by domicile, residence, place of management, or a similar criterion, with a company's residence tie-broken to wherever its place of effective management sits. A Tax Residency Certificate from Skatteetaten is the standard evidence.

Anti-Abuse: Article 29 LOB, the MLI PPT, and Domestic GAAR

Article 13 does not itself reference beneficial ownership, but substance still matters: Article 29's Limitation of Benefits clause denies treaty benefits where a main purpose of creating the Norwegian holding entity, or of the disposal transaction, was to obtain benefits otherwise unavailable. Because the treaty is a matched Covered Tax Agreement under the MLI (effective for this treaty from FY 2020-21), the MLI's Principal Purpose Test applies as well. India's domestic GAAR is a further backstop, capable of overriding treaty protection -- including the Article 13(5) residual clause -- where an arrangement lacks commercial substance and its main purpose is a tax benefit.

India's Domestic Indirect-Transfer Rules

Section 9 of the Income-tax Act, 2025 deems capital gains from shares of an Indian company as income arising in India; its business-connection limb is section 9(2)(c), with the definition at section 9(9). India's indirect-transfer provisions -- carried forward from Explanation 5 to section 9(1)(i) of the Income-tax Act, 1961, introduced after the Vodafone litigation -- can also reach gains on the sale of shares of a non-Indian (including Norwegian) company that derives substantial value from Indian assets. Article 13(4) covers only shares in a company resident in India or Norway; a gain from selling shares of a third-country company would instead fall to the Article 13(5) residual clause, taxable only in the seller's residence state -- though India's indirect-transfer rules and GAAR can still reach such a structure where it lacks commercial substance.

Documentation Required for Capital Gains Treaty Claims

Tax Residency Certificate (TRC)

A TRC from Skatteetaten confirming Norwegian tax residency for the relevant year, mandatory under section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961) -- the foundational document without which treaty benefits cannot be claimed.

Form 41 (formerly Form 10F)

Where the TRC omits prescribed particulars, Form 41 must be filed electronically -- mandatory since July 2022, even without an Indian PAN.

Self-Declaration

A self-declaration confirming beneficial ownership of the asset, and, where Article 13(5) protection is claimed, that the gain is not attributable to a permanent establishment in India. Documenting the commercial rationale for the holding structure is prudent given India's domestic GAAR.

Forms 145 and 146 (formerly Forms 15CA and 15CB) for Remittances

When the Indian buyer remits sale proceeds to Norway, Form 145 must be filed electronically; for remittances above INR 5 lakh, a Chartered Accountant's certificate in Form 146 is also required, certifying the taxability of the transaction and the applicable treaty article.

Withholding Procedure for Indian Payers

TDS on Share Transfers

When a Norwegian resident sells shares of an Indian company, the buyer must deduct tax at source under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961), at the rates in force -- since Article 13 allocates the taxing right rather than prescribing a specific withholding percentage, the domestic capital-gains rate applies once valid TRC and Form 41 documentation is on file.

Lower Withholding Certificate

The Norwegian seller can apply to the Assessing Officer under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961) for a certificate specifying a lower withholding rate -- useful where the actual gain is small relative to the sale consideration, or losses are available to offset. For sums covered by section 393(2), the Indian buyer's own route to determine the appropriate taxable proportion is a separate application under section 395(2) (section 195(2)/(3) of the Income-tax Act, 1961).

Advance Ruling

For complex disposals, a Norwegian seller can seek certainty in advance from the Board for Advance Rulings, whose constitution and definitions sit at section 380 of the Income-tax Act, 2025 (section 245N of the Income-tax Act, 1961), with the application and procedure at sections 383 and 384 (sections 245Q and 245R of the Income-tax Act, 1961).

Domestic Capital Gains Rates in Detail

Where Article 13 allocates the taxing right to India, the following domestic rates apply to a Norwegian seller (Finance Act 2024, effective 23 July 2024):

• Listed-share short-term capital gains (STCG): 20%, under section 196 of the Income-tax Act, 2025 (section 111A of the Income-tax Act, 1961), for shares held up to 12 months.
• Listed-share long-term capital gains (LTCG): 12.5% on gains above INR 1.25 lakh per year, under section 198 of the Income-tax Act, 2025 (section 112A of the Income-tax Act, 1961), for shares held over 12 months.
• Unlisted-share LTCG: 12.5% without indexation, under section 197 of the Income-tax Act, 2025 (section 112 of the Income-tax Act, 1961) -- a different provision from the similarly-numbered lower-deduction-certificate section of the 1961 Act (old section 197, now renumbered to section 395(1) of the 2025 Act), for shares held over 24 months.

These rates reflect the Finance Act 2024 restructuring of India's capital-gains regime; earlier indexed 20% rates on unlisted shares no longer apply to disposals after 23 July 2024.

Common Disputes and Practical Issues

Article 13(4) Reaches Every Share Sale

Because Article 13(4) has no land-rich carve-out and no minimum-holding threshold, a Norwegian resident selling even a small portfolio stake in a listed Indian company remains fully within India's taxing right under the treaty -- there is no treaty shelter comparable to what a land-rich or substantial-participation carve-out would provide in other Indian treaties. Structuring around Article 13(4) accordingly gets little traction; the residual Article 13(5) is available only for property genuinely outside the first four categories.

Indirect Transfers Through a Norwegian Holding Company

Where a Norwegian holding company itself derives substantial value from Indian assets, a sale of shares in that Norwegian company by its own (non-Indian) parent falls to Article 13(5) on its face, but India's indirect-transfer provisions can still reach the underlying Indian value if the structure lacks commercial substance -- this is the same analysis that produced the Vodafone and Cairn Energy litigation, and remains a live risk area for any Norway-routed holding chain.

PE Attribution of Share Gains

Indian authorities have occasionally argued that where a Norwegian company has an Indian PE, gains on Indian assets held by the same enterprise should be attributed to that PE under Article 13(2). Tribunals have generally required a genuine functional connection -- the shares must form part of the PE's business property, not merely be held by the same legal entity that happens to have a PE elsewhere in India.

Practical Examples

Example 1: Norwegian Company Selling an Indian Subsidiary

A Norwegian holding company sells its 100% holding in an Indian unlisted subsidiary for INR 12 crore, with an original cost of INR 5 crore (held for four years).

• Capital gain: INR 7 crore (long-term, holding period exceeds 24 months for unlisted shares)
• India's right to tax: Yes -- Article 13(4), no minimum-holding threshold applies
• Indian tax: 12.5% LTCG = INR 87.5 lakh (plus applicable surcharge and cess)
• Norway relief: Norway credits the Indian tax paid against the seller's Norwegian tax on the same gain

Example 2: Norwegian Portfolio Investor in a Listed Indian Company

A Norwegian individual sells listed shares worth INR 40 lakh on the NSE, with an original cost of INR 25 lakh (held for 18 months).

• Capital gain: INR 15 lakh (long-term, holding period exceeds 12 months for listed shares)
• India's right to tax: Yes -- Article 13(4)
• Indian tax: 12.5% LTCG on gains above INR 1.25 lakh -- approximately INR 1.72 lakh
• Norway relief: Credit for the Indian tax against Norwegian capital-gains tax on the same disposal

Example 3: Sale of a Ship in International Traffic

A Norwegian shipping company sells a vessel operated in international traffic between Indian and European ports, realising a substantial gain. Under Article 13(3), the gain is taxable only in Norway, the company's state of residence -- India has no taxing right, regardless of the vessel's trading routes through Indian ports.

For structuring cross-border transactions between India and Norway, see Beacon Filing's tax advisory services and the Norway company registration guide. Also see the complete India-Norway DTAA guide and the withholding tax rates page.

Frequently Asked Questions

How are capital gains taxed under the India-Norway DTAA?

Article 13 allocates taxing rights by asset type rather than fixing one rate. Immovable property is taxed where situated; shares of a resident company may be taxed by that company's state of residence with no minimum-holding threshold; ships and aircraft gains, and residual property gains, are taxed only in the alienator's residence state.

Can India tax a Norwegian resident's gain on Indian company shares, no matter how small the stake?

Yes. Article 13(4) has no minimum-holding threshold and no land-rich carve-out -- it reaches gains on shares in an Indian company at any shareholding level. India applies 12.5% LTCG (listed, over 12 months, above INR 1.25 lakh, or unlisted, over 24 months) or 20% STCG (listed, up to 12 months).

Are gains from ships and aircraft taxed differently?

Yes. Article 13(3) gives exclusive taxing rights to the alienator's residence state for gains on ships or aircraft operated in international traffic -- a residence-based rule rather than a place-of-effective-management test. This gives shipping and aviation operators between India and Norway single-state certainty on any disposal gain.

Does Article 13(5) protect all other property from Indian tax?

Article 13(5) gives exclusive taxing rights to the seller's residence state for property not covered by paragraphs 1 to 4 -- intellectual property, goodwill, and similar assets. However, India's domestic indirect-transfer rules and GAAR can still reach certain structures routed through a low-substance Norwegian entity.

What documentation does a Norwegian seller need to claim treaty protection?

A Tax Residency Certificate from Skatteetaten, Form 41 (formerly Form 10F) filed electronically, a self-declaration of beneficial ownership and non-PE status, and Forms 145/146 filed by the Indian buyer for the remittance. A lower-withholding certificate can be sought under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961).

How does Norway relieve double taxation on gains taxed in India?

Under Article 24's ordinary credit method, Norway includes the gain in the resident's taxable income and credits the Indian tax paid against the Norwegian tax on the same income, up to the Norwegian tax otherwise payable on that gain for the relevant year.