Capital Gains Tax Between India and Thailand Under DTAA

Quick answer: Under Article 13 of the India-Thailand DTAA (signed 29 June 2015, in force 13 October 2015, effective in India from 1 April 2016), capital gains are not taxed at a single treaty rate -- the article instead allocates taxing rights by asset type. India can tax gains on Indian immovable property (Article 13(1)) and on shares of a company whose property consists principally of immovable property, or on other shares in a company resident in India (Article 13(4) and (5)), applying its own domestic rates: 12.5% long-term capital gains, 20% short-term on listed shares. Distinctively, the residual clause for all other property (Article 13(6)) does not give the seller's residence state exclusive rights -- both India and Thailand keep the right to tax under their own domestic law.

Key takeaways:

• Article 13 allocates taxing rights by asset type -- there is no single capital gains treaty rate
• India can tax gains on Indian immovable property and on shares of Indian companies at domestic rates
• Article 13(4)'s "property-rich company" test uses the word "principally," with no percentage threshold stated in the treaty text
• Article 13(6)'s residual clause is unusual: BOTH states keep their own domestic taxing rights, not just the seller's residence state
• India's domestic long-term capital gains rate is 12.5%; short-term on listed shares is 20%

Capital Gains Tax Between India and Thailand

The India-Thailand DTAA, signed at Bangkok on 29 June 2015, in force from 13 October 2015 and effective in India from 1 April 2016, addresses capital gains under Article 13 -- a six-paragraph article that allocates which country may tax a gain according to the type of asset sold, rather than prescribing a single withholding rate the way Articles 10 to 12 do for dividends, interest, and royalties. Once a paragraph gives a state the right to tax, that state applies its own domestic capital gains rules and rates -- the treaty does not cap the rate itself.

This asset-by-asset structure matters enormously for Thai investors disposing of Indian shares or property, and for Indian residents selling Thai assets. Getting the classification right -- immovable property, PE-connected movable property, ships and aircraft, shares of a resident company, or "any other property" -- determines not just which country can tax the gain, but whether both countries can, and by how much.

The Categories of Article 13

Article 13(1): Immovable Property

Gains from selling immovable property situated in India, alienated by a Thai resident, "may be taxed in that other State" -- India. Conversely, gains on Thai immovable property sold by an Indian resident may be taxed in Thailand. India applies its ordinary domestic rates to such gains.

Article 13(2): Movable Property Connected to a Permanent Establishment

Gains from selling movable property forming part of the business assets of a permanent establishment -- including gains on selling the PE itself, alone or with the whole enterprise -- may be taxed in the state where the PE is situated. In India, this is generally taxed at the applicable foreign-company corporate rate.

Article 13(3): Ships and Aircraft in International Traffic

Gains from the alienation of ships or aircraft operated in international traffic, or movable property pertaining to their operation, "shall be taxable only in the Contracting State of which the alienator is a resident." Notably, this rests on the alienator's residence, not on where the enterprise's place of effective management is situated -- a distinction from treaties (including several of India's European treaties) that use effective-management wording for this category.

Article 13(4): Shares of an Immovable-Property-Rich Company

Gains from selling shares "of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State" may be taxed in that state. The treaty conditions this on the property being "principally" immovable property -- it does not state a specific percentage threshold (such as "more than 50%"), so the test is a qualitative one about the company's overall asset composition rather than a bright-line numerical rule.

Article 13(5): Other Shares in a Resident Company

Gains from selling shares other than the property-rich shares in paragraph 4, in a company resident in a Contracting State, "may be taxed in that State." This is a broad source-country right over gains on shares of resident companies generally -- the treaty text states no minimum shareholding percentage and no look-back period, unlike some other Indian treaties that condition this right on a substantial-shareholding threshold.

Article 13(6): The Residual Clause -- Both States Keep Their Rights

Gains from any property not covered by paragraphs 1 to 5 "may be taxed in accordance with the taxation laws of the respective Contracting States." This is a distinctive and important feature of the India-Thailand treaty: unlike many DTAAs where a residual clause gives the seller's residence state the exclusive right to tax (protecting the seller from double taxation on gains outside the named categories), Article 13(6) leaves both India and Thailand free to tax such gains under their own domestic law. Relief from double taxation in this category therefore depends on the credit mechanism in Article 23, not on an exclusive allocation of taxing rights.

Who Qualifies for Treaty Analysis on Capital Gains

Tax Residency Requirement

The seller claiming the benefit of a particular Article 13 allocation must be a tax resident of Thailand under Article 4, evidenced by a Tax Residency Certificate from the Revenue Department of Thailand for the relevant year.

Beneficial Ownership Is Not an Explicit Test Here

Unlike Articles 10 to 12, Article 13 does not use the phrase "beneficial owner." Substance still matters, however: India's domestic General Anti-Avoidance Rule (GAAR), in force since April 2017, can deny the benefit of any Article 13 allocation -- including the residual clause -- where a share sale is structured through a Thai entity primarily to obtain a tax advantage without genuine commercial substance.

Anti-Abuse: MLI Principal Purpose Test

India and Thailand have both ratified the MLI and matched the India-Thailand DTAA as a Covered Tax Agreement, so the Principal Purpose Test applies across the treaty, including to capital gains structuring. There is no Limitation of Benefits article in this treaty, so the PPT and India's domestic GAAR are the two operative safeguards against treaty shopping in share-sale transactions.

India's Domestic Indirect-Transfer Rules

Separately from the treaty, India's indirect-transfer rule can tax gains on the transfer of shares of a foreign (non-Indian, non-Thai) company that derive substantial value from Indian assets. Under section 9(2)(d) read with section 9(10)(a) of the Income-tax Act, 2025 (Explanation 5 to section 9(1)(i) of the Income-tax Act, 1961), such a share or interest is deemed to be situated in India, and section 9(10)(b) sets the threshold: the Indian assets must exceed INR 10 crore in value and represent at least 50% of the value of all the company's assets on the specified date. Article 13 of the India-Thailand treaty covers only shares of a company resident in India or Thailand, so it does not, on its own wording, address a third-country indirect transfer of this kind.

India's Domestic Capital Gains Rates (Applied Once India Has Taxing Rights)

Once Article 13 confirms India's right to tax a gain, India's own capital gains regime -- not the treaty -- sets the rate:

• Short-term capital gains on listed shares (held 12 months or less, subject to securities transaction tax): 20% under section 196 of the Income-tax Act, 2025 (section 111A of the Income-tax Act, 1961).
• Long-term capital gains on listed shares (held over 12 months): 12.5% on gains exceeding INR 1.25 lakh in a year, under section 198 of the Income-tax Act, 2025 (section 112A of the Income-tax Act, 1961).
• Long-term capital gains on unlisted shares and other capital assets (generally held over 24 months): 12.5% without indexation, under section 197 of the Income-tax Act, 2025 (section 112 of the Income-tax Act, 1961) as amended by the Finance Act 2024.

These are the same domestic rates applied to any non-resident seller once the treaty confirms India's taxing right -- the treaty allocates the right; it does not itself set a preferential rate for capital gains the way it does for dividends, interest, and royalties.

Relief From Double Taxation: Article 23

Where a gain is taxable in both states -- most obviously under the residual Article 13(6), but also wherever a state's domestic law reaches a gain the other state has also taxed -- Article 23 provides the mechanism for double taxation relief. Under Article 23(2)(i), where a resident of India has been taxed in Thailand, India allows a credit for the Thai tax against Indian tax on the same income; symmetrically, Article 23(2)(ii) has Thailand allow a resident of Thailand a credit for Indian tax paid on income also taxed in India. Both sides use the ordinary credit method, not exemption -- so a Thai seller's Indian tax is credited against Thai tax under Article 23(2)(ii), per Thailand's own domestic procedure for claiming it.

Documentation and Withholding Procedure

Tax Residency Certificate and Form 41

A Thai seller should obtain a Tax Residency Certificate from the Revenue Department of Thailand and, where the TRC lacks prescribed details, file Form 41 (formerly Form 10F) electronically, to support the Article 13 analysis and any subsequent tax-credit claim.

Section 393(2): TDS on the Buyer

Where an Indian buyer acquires shares or immovable property from a Thai non-resident seller, section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961) requires the buyer to deduct tax at source on the capital gains component, at India's applicable domestic rate for the relevant category of gain.

Forms 145 and 146 for Remittance

The Indian buyer must file Form 145 electronically before remitting sale proceeds to Thailand, obtaining a Chartered Accountant's Form 146 certificate for remittances exceeding INR 5 lakh.

Lower Withholding Certificate

Where the actual capital gains tax liability is expected to be lower than the amount otherwise deductible at source -- for example, where the acquisition cost is close to the sale price, or losses are available to offset -- the Thai 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 rate.

Practical Examples and Calculations

Example 1: Thai Company Selling Shares of an Indian Subsidiary

Bangkok Trading Co Ltd, a Thai company, sells its 100% shareholding in an unlisted Indian subsidiary for INR 8 crore, having originally invested INR 3 crore, held for four years.

• Gain: INR 5 crore, long-term (unlisted shares held over 24 months).
• India's right to tax: Yes -- Article 13(5), as this is a sale of shares in a company resident in India.
• Indian tax: 12.5% of INR 5 crore = INR 62.5 lakh (section 197 of the Income-tax Act, 2025), plus applicable surcharge and cess.
• Thailand relief: Bangkok Trading claims a credit in Thailand for the Indian tax paid, under Article 23(2)(ii).

Example 2: Thai Individual Selling Listed Indian Shares

Khun Somchai, a Thai individual, sells listed shares of an Indian company on the NSE for INR 30 lakh, having bought them for INR 20 lakh 18 months earlier.

• Gain: INR 10 lakh, long-term (listed shares held over 12 months).
• India's right to tax: Yes -- Article 13(5).
• Indian tax: 12.5% on the gain above INR 1.25 lakh, under section 198 of the Income-tax Act, 2025, plus Securities Transaction Tax on the sale value.
• Relief: Khun Somchai claims a credit in Thailand for the Indian tax paid under Article 23(2)(ii).

Example 3: Sale of an Indian Warehouse (Immovable Property)

A Thai logistics company sells a warehouse it owns in India for INR 4 crore, having built it for INR 2.5 crore six years earlier.

• Gain: INR 1.5 crore, long-term immovable property.
• India's right to tax: Yes -- Article 13(1), as the property is situated in India.
• Indian tax: Domestic long-term capital gains rate applies to the gain.
• Thailand relief: A credit for the Indian tax paid is available under Article 23.

Example 4: A Residual-Clause Gain Taxable in Both States

A Thai resident sells an intangible asset -- say, a partnership interest not connected to any Indian PE and not consisting of shares in an Indian or Thai company -- that does not fit neatly into paragraphs 1 to 5. Under Article 13(6), the gain "may be taxed in accordance with the taxation laws of the respective Contracting States" -- meaning both India and Thailand may tax it if their own domestic law reaches it, unlike treaties where a residual clause reserves the gain exclusively to the seller's residence state. Relief, if double taxation arises, comes only through the Article 23 credit mechanism, not through an exclusive allocation of taxing rights.

For related provisions, see our India-Thailand DTAA complete guide and withholding tax rates page, and our guide to registering a company in India from Thailand. Beacon Filing's tax advisory team can help structure share sales and property transactions between India and Thailand.

Frequently Asked Questions

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

Article 13 allocates taxing rights by asset type rather than setting a single rate. India can tax gains on Indian immovable property and on shares of companies resident in India, applying its own domestic rates -- 12.5% long-term, 20% short-term on listed shares. The residual clause for other property lets both India and Thailand tax under their own domestic law.

Can India tax a Thai resident on gains from selling shares of an Indian company?

Yes. Under Article 13(5), gains from shares of a company resident in India may be taxed in India, with no minimum shareholding threshold stated in the treaty. India applies its domestic rates: 12.5% long-term capital gains, or 20% short-term on listed shares, and Thailand then provides a credit for the Indian tax paid.

What does "principally" mean in the property-rich company test?

Article 13(4) taxes gains on shares of a company whose property consists directly or indirectly "principally" of immovable property, without stating a specific percentage threshold in the treaty text. This is a qualitative test of the company's overall asset composition, not a fixed numerical rule like the ">50%" thresholds found in some other treaties.

Does the residual clause protect all other capital gains from double taxation?

Not automatically. Article 13(6) allows gains outside the named categories to be taxed "in accordance with the taxation laws of the respective Contracting States" -- meaning both India and Thailand may tax such gains under their own law. Relief depends on the Article 23 tax-credit mechanism, not on an exclusive allocation to the seller's residence state.

How are gains on ships and aircraft treated under this treaty?

Under Article 13(3), gains from ships or aircraft operated in international traffic are taxable only in the state where the alienator (the seller) is resident -- based on residence, not on the enterprise's place of effective management, which is the test used in some other Indian treaties for this category.

What documentation does a Thai seller need to support a capital gains treaty position?

A Tax Residency Certificate from the Revenue Department of Thailand, Form 41 filed electronically where required, and supporting documents on the asset and shareholding structure. The Indian buyer must withhold tax under section 393(2) and file Form 145 (and Form 146 for amounts exceeding INR 5 lakh) before remitting proceeds.