FTS Tax Rate Between India and Thailand Under DTAA

Quick answer: Unlike many of India's DTAAs, the India-Thailand treaty (signed 29 June 2015, in force 13 October 2015, effective in India from 1 April 2016) contains no article on fees for technical services (FTS) at all. Fees for managerial, technical, or consultancy services paid to a Thai resident are instead governed by Article 7 (business profits, taxable in India only if the Thai provider has a permanent establishment) or Article 14 (independent personal services, taxable only with a fixed base or a stay amounting to or exceeding 183 days in any 12-month period). Absent a PE or fixed base the treaty leaves India no right to tax the fee at all; India's domestic 20% rate under section 207(2) of the Income-tax Act, 2025 applies wherever the treaty position is not invoked, and there is no reduced treaty FTS rate to claim.

Key takeaways:

• The India-Thailand DTAA has NO separate article on fees for technical services -- a genuine treaty feature, not an oversight in this guide
• Technical, managerial, and consultancy fees fall under Article 7 (business profits) or Article 14 (independent personal services)
• Without a PE or fixed base the treaty bars India from taxing the fee; the 20% domestic rate applies only where the treaty position is not invoked
• A fee that in substance rents equipment or transfers know-how is a royalty under Article 12(3), taxable in India at 10% whether or not a PE exists
• With a PE or fixed base, the fees are taxed as business profits at India's foreign-company corporate rate, on a net basis
• The "make available" concept, common in other Indian treaties' FTS articles, does not arise here at all

FTS Tax Rate Between India and Thailand: There Is No Treaty Rate

India has separate fees-for-technical-services provisions in many of its treaties, typically capping the withholding rate at 10% under an Article 12 combined with royalties, or under a dedicated FTS article. 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, is different: after a full review of all 30 articles of the treaty text, there is no fees-for-technical-services article anywhere. Thailand sits alongside Saudi Arabia and the UAE among India's treaty partners whose agreements omit an FTS provision entirely.

This is a genuine structural feature of the treaty, not an omission in this guide, and it has real practical consequences: technical, managerial, and consultancy service fees paid by an Indian business to a Thai service provider receive no reduced treaty rate. Instead, they fall to be taxed under the treaty's general business-income provisions -- Article 7 (business profits) or Article 14 (independent personal services) -- or, absent a permanent establishment, under India's ordinary domestic law.

Where FTS-Type Payments Actually Fall Under This Treaty

Article 7: Business Profits

Where a Thai company provides managerial, technical, or consultancy services to an Indian client, the fee is treated as business profits under Article 7. Article 7(1) provides that "the profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein" -- and even then, only the profits attributable to that PE may be taxed in India. There is no "force of attraction" language extending Indian tax to profits unconnected with the PE. Absent a PE, the fee income is not taxable in India at all under the treaty -- though India's domestic law still imposes withholding, discussed below.

Article 14: Independent Personal Services

Where the Thai service provider is an individual (rather than a company), Article 14 applies instead of Article 7. Under Article 14(1), income from professional services is "taxable only" in Thailand unless (a) the individual has a fixed base regularly available in India for performing the activities, in which case only the income attributable to that fixed base is taxable in India, or (b) the individual's stay in India totals 183 days or more within any 12-month period, in which case only the income from the India-based activities is taxable in India. Short consultancy visits below the 183-day threshold, without a fixed base, escape Indian tax entirely under the treaty.

Article 12: When a "Technical Services" Fee Is Really a Royalty

Before reaching for Article 7 or Article 14, check whether the arrangement is in substance a royalty. Article 12(3) defines royalties to include payments for "the use of, or the right to use, industrial, commercial or scientific equipment" and for "information concerning industrial, commercial or scientific experience" -- that is, know-how. A contract labelled technical services that in substance rents equipment to the Indian customer, or hands over industrial know-how rather than performing a service, is taxed as a royalty under Article 12(2) at 10% of the gross amount, and India may tax it whether or not the Thai provider has a permanent establishment. Mixed contracts should be apportioned between the royalty element and the genuine service element, because the two are taxed on entirely different bases -- gross at 10% under Article 12, versus not at all under Article 7 absent a PE.

Article 5: What Creates a Service PE for a Thai Company

For corporate service providers, the relevant threshold is the services-PE limb of Article 5(3)(b): a Thai enterprise is deemed to have a PE in India if it furnishes services, including consultancy services, through employees or other personnel in India for the same or a connected project, for a period or periods aggregating more than 183 days within any 12-month period. Below that threshold, and absent a fixed place of business, no PE arises and the fee income is not taxable in India under Article 7.

Domestic Tax Treatment Absent a Treaty Rate

No PE or Fixed Base: No Indian Taxing Right, but a 20% Withholding Default

Where the Thai service provider has no PE or fixed base in India, the treaty gives India no right to tax the fee, and section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961) entitles the provider to rely on that treaty position wherever it is more beneficial than the domestic charge. What is missing is any middle ground: with no FTS article there is no reduced treaty rate to invoke, so the fee is either outside India's net entirely or fully inside it. Where the Indian payer is not satisfied that the treaty exemption applies, its TDS obligation falls back on India's domestic section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961), which taxes fees for technical services paid to non-residents at a flat 20% of the gross amount (plus surcharge and cess) -- doubled from 10% by the Finance Act 2023. A Thai recipient who is not taxable in India under Article 7 should obtain a lower or nil withholding certificate in advance (below), or file an Indian tax return to recover the tax withheld.

With a PE: Net Business Profits at the Foreign-Company Rate

Where the Thai enterprise does have a PE in India (for example, because its personnel exceeded 183 days on a connected consultancy project), the fee income attributable to that PE is instead taxed as business profits under Article 7, computed on a net basis (income less deductible expenses) at India's foreign-company corporate tax rate -- 35%, plus surcharge and cess (effective rate approximately 38.22% for profits above INR 10 crore, or approximately 37.13% for profits between INR 1 crore and INR 10 crore). This can be a materially different, and sometimes higher, outcome than the flat 20% domestic withholding that applies without a PE.

No "Make Available" Concept

Many Indian treaties with an FTS article -- the India-USA treaty is the best-known example -- condition FTS taxation on the services "making available" technical knowledge, skill, or know-how to the recipient, a restrictive test that narrows what counts as FTS. Because the India-Thailand DTAA has no FTS article at all, the "make available" concept simply does not arise: the relevant question is never whether knowledge was "made available," but whether the Thai provider has a PE (for a company) or a fixed base or 183-day presence (for an individual) in India. Advisers used to treaties with a "make available" test should not attempt to import that analysis here -- it has no bearing on how India-Thailand service fees are taxed.

Who Qualifies for What Treatment

Determining Enterprise vs Individual Status

The first question for any Thai service provider is whether it operates as a company (Article 7 applies) or as an individual providing professional services (Article 14 applies) -- the tests differ meaningfully, particularly around the 183-day threshold, which for individuals under Article 14(1)(b) is measured by physical presence, while for corporate services under Article 5(3)(b) it is measured by the aggregate duration of the project.

Tax Residency and Anti-Abuse (MLI Principal Purpose Test)

Whichever article applies, the Thai provider must be a genuine tax resident of Thailand, evidenced by a Tax Residency Certificate from the Revenue Department of Thailand. Both India and Thailand have ratified the MLI and matched the India-Thailand DTAA as a Covered Tax Agreement, so the Principal Purpose Test applies: service arrangements structured to avoid crossing the PE or fixed-base thresholds mainly to escape Indian tax altogether can still be challenged if their principal purpose was to obtain that treaty outcome without genuine commercial substance.

Documentation and Withholding Procedure

Tax Residency Certificate and Form 41

Even though no treaty rate applies, the Thai provider should still obtain a Tax Residency Certificate and file Form 41 (formerly Form 10F) electronically, since these documents evidence Thai residency for purposes of both the PE-threshold analysis and any subsequent tax-credit claim in Thailand.

Section 393(2): TDS Obligation

The Indian payer must deduct TDS under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961) at the time of payment or credit, whichever is earlier -- ordinarily at the domestic 20% rate absent a specific reason to apply a lower rate, since there is no treaty FTS rate to invoke.

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

Before remitting the fee to Thailand, the Indian payer must file Form 145 electronically, and obtain a Chartered Accountant's certificate in Form 146 for remittances exceeding INR 5 lakh, setting out the basis for taxability (or non-taxability, where Article 7 or 14 is invoked).

Lower or Nil Withholding Certificate (Section 395(1))

Where the Thai provider genuinely has no PE or fixed base in India and the fee should not be taxable at all under Article 7 or Article 14, the provider 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 authorising nil or lower withholding, rather than paying 20% upfront and seeking a refund afterwards.

Practical Examples

Example 1: Short Consultancy Assignment, No PE

A Thai engineering consultancy sends two engineers to India for a 90-day plant-commissioning assignment, invoicing the Indian client INR 40 lakh. Because the assignment is well under the 183-day services-PE threshold and there is no fixed place of business, no PE arises under Article 5(3)(b), and the fee is not taxable in India under Article 7. Absent a lower-withholding certificate, however, the Indian payer would still be expected to withhold at the domestic 20% rate under section 207(2), with the Thai consultancy then filing an Indian return (or obtaining the section 395(1) certificate in advance) to recover the excess.

Example 2: Long-Running Technical Support Contract Crossing the PE Threshold

A Thai IT services firm provides on-site technical support to an Indian manufacturer under a connected series of contracts, with personnel present in India for 210 days across a 12-month period -- exceeding the 183-day services-PE threshold under Article 5(3)(b). A PE now exists, and the fee income attributable to it is taxed as business profits under Article 7 at India's foreign-company rate of 35% (plus surcharge and cess) on a net basis, rather than at the flat 20% domestic withholding rate that would have applied absent a PE.

Example 3: Individual Consultant Under Article 14

A self-employed Thai management consultant works in India for 60 days advising an Indian client, with no fixed base available in India. Because the stay is far below the 183-day threshold under Article 14(1)(b) and there is no fixed base, the fee is taxable only in Thailand under the treaty -- though, again, Indian domestic withholding at 20% would still apply in practice absent a lower-withholding certificate.

For the full treaty text and related income categories, see our India-Thailand DTAA complete guide and withholding tax rates page. Beacon Filing's India entry strategy team can help Thai service providers assess PE risk before starting a project in India.

Frequently Asked Questions

Does the India-Thailand DTAA have a reduced rate for fees for technical services?

No. The India-Thailand DTAA has no separate article on fees for technical services at all. Such fees fall under Article 7 (business profits, taxable in India only with a permanent establishment) or Article 14 (independent personal services). Absent either, the treaty bars India from taxing the fee at all; because there is no reduced treaty rate to invoke, the 20% domestic rate applies wherever that treaty position is not claimed.

How are Thai consultancy fees taxed if there is no FTS article?

They are treated as business profits under Article 7 if the provider is a company, or as independent personal services under Article 14 if the provider is an individual. Tax arises in India only if the Thai enterprise has a permanent establishment, or the individual has a fixed base or stays 183 days or more within a 12-month period.

What creates a permanent establishment for a Thai service company in India?

Under Article 5(3)(b), a Thai company creates a services PE in India if it furnishes services, including consultancy, through personnel present in India for the same or a connected project for more than 183 days within any 12-month period. Below that threshold, no PE arises absent a fixed place of business.

Does the "make available" test apply to technical services under this treaty?

No. The "make available" concept, found in treaties like India-USA, applies only where a dedicated FTS article uses that language. Because the India-Thailand DTAA has no FTS article, the concept never arises -- the relevant test is instead the presence of a permanent establishment or fixed base.

What withholding rate applies if a Thai provider has no PE in India?

Absent a permanent establishment, Article 7 gives India no right to tax the fee, and section 159(4) of the Income-tax Act, 2025 lets the Thai provider rely on that. In practice an Indian payer that is not satisfied the exemption applies withholds at the domestic 20% rate under section 207(2), so the provider should obtain a lower or nil withholding certificate in advance under section 395(1) or reclaim the tax by filing an Indian return.

How are fees taxed if the Thai provider does have a PE in India?

The fee income attributable to the permanent establishment is taxed as business profits under Article 7, computed on a net basis at India's foreign-company corporate rate of 35% (plus surcharge and cess), rather than at the 20% flat domestic withholding rate that applies without a PE.