India-Kazakhstan DTAA: Complete Guide to the Double Taxation Avoidance Agreement

Quick answer: The India-Kazakhstan DTAA applies a uniform 10% withholding rate to dividends, interest, royalties, and fees for technical services (FTS) — no shareholding tiers, no bank exemptions beyond the Government and Central Bank. Interest paid to the Government, a political subdivision, a local authority or the Central Bank of the other country is exempt. Signed 9 December 1996, in force from 2 October 1997, the treaty was substantially rewritten by a 2017 Protocol (in force 12 March 2018) that added a 90-day services permanent establishment, inserted a Limitation of Benefits article, and deleted the treaty's original most-favoured-nation clause. The Multilateral Instrument (MLI) also applies, layering the Principal Purpose Test and a Simplified Limitation on Benefits regime on top of the treaty from 1 April 2021.

Key takeaways:

• Dividends, interest, royalties, and FTS are all capped at a flat 10% under this DTAA — no tiers
• Interest paid to the Government, a political subdivision, a local authority, or the Central Bank of the other State is exempt (Article 11(3))
• Three separate PE clocks: 12 months for construction, 6 months for natural-resource exploration installations, 90 days for a standalone services PE
• The treaty's original most-favoured-nation clause was deleted by the 2017 Protocol, effective in India from 1 April 2018 — it cannot be relied on today
• The MLI applies both the Principal Purpose Test and a Simplified Limitation on Benefits regime, on top of the treaty's own Article 28A

Overview of the India-Kazakhstan DTAA

The Double Taxation Avoidance Agreement (DTAA) between India and Kazakhstan allocates taxing rights over cross-border income and capital between the two countries. It was signed at New Delhi on 9 December 1996 and entered into force on 2 October 1997, thirty days after both governments completed ratification under Article 30. Notified in India by GSR 633(E) [No. 10449 (F. No. 501/6/94-FTD)], dated 31 October 1997, it has effect in India for financial years beginning on or after 1 April 1998.

The Convention covers taxes on both income and capital: India's income tax (with surcharge) and its wealth-tax on capital (now dormant), and Kazakhstan's corporate income tax, individual income tax, and property tax. A dedicated Article 23 (Capital) allocates taxing rights over capital itself — a feature many newer Indian treaties have dropped along with the wealth-tax.

As originally signed, the treaty ran to 31 articles plus an integral Protocol. A 2017 amending Protocol (signed 6 January 2017, in force 12 March 2018) rewrote the permanent-establishment, source, and exchange-of-information provisions and inserted a new Article 28A on Limitation of Benefits. Legacy commentary that predates 2018 is now materially wrong on several points, so both the 1996 text and the 2017 amendments matter for current planning.

Treaty History, Protocol Chain and MLI Status

The 1996 Protocol, signed with the Convention, forms an integral part of it. Its surviving substance is an anti-force-of-attraction attribution rule: on turnkey and EPC-style contracts, profits attributed to a PE are limited to "that part of the contract which is effectively carried out by the permanent establishment," not the total contract value. The 1996 Protocol originally also carried a most-favoured-nation (MFN) clause covering dividends, interest, royalties, and FTS, but that clause no longer exists.

The 2017 amending Protocol (in force 12 March 2018; notified in India by S.O. 1589(E) [No. 20/2018 (F.No.501/06/94-FTD-II)], dated 12 April 2018) cut the natural-resource-exploration PE threshold from 12 to 6 months; inserted an entirely new 90-day services PE; replaced the source rule for interest, royalties, and FTS so they arise where the payer is resident; inserted a corresponding-adjustment paragraph for associated enterprises; added Article 28A; and — the change most likely to trip up an older summary — deleted the treaty's MFN clause outright. These changes took effect in India from 1 April 2018.

Both India and Kazakhstan also listed each other's treaty as a Covered Tax Agreement under the OECD's Multilateral Instrument (MLI), so the MLI modifies this DTAA. India's MLI entered into force 1 October 2019; Kazakhstan's on 1 October 2020. Because the MLI's "entry into effect" rule keys off the later of the two dates, its changes apply to India-source withholding tax only from 1 April 2021 — never the 2019 or 2020 dates. The treaty's model basis is a hybrid: UN Model-style features (a warehouse or sales outlet and farm as listed PEs, an insurance PE, a source-state right over residual "other income," uncapped tax sparing) built around an OECD-style spine for dividends, interest, and royalties.

Who the Treaty Covers and Residence Tie-Breaker Rules

The Convention applies to residents of India, Kazakhstan, or both (Article 1). Article 4 defines "resident" using the standard liability-to-tax test — domicile, residence, place of incorporation (understood, per the 2017 Protocol, to include "place of registration"), place of management, or similar criteria; a person taxable only on locally sourced income does not qualify.

Where an individual is a dual resident, Article 4(2) applies the usual cascading tie-breaker: permanent home, then centre of vital interests, then habitual abode, then nationality, then mutual agreement. For a dual-resident entity, Article 4(3) looks to the place of effective management; where both states notified the relevant MLI change, that automatic test gives way to mutual agreement between the competent authorities instead. The treaty's named competent authority is the Ministry of Finance in Kazakhstan and the Central Government, Ministry of Finance (Department of Revenue), in India.

Permanent Establishment and Business Profits

Article 5 defines a permanent establishment (PE) as a fixed place of business through which an enterprise's business is wholly or partly carried on. The illustrative list — place of management, branch, office, factory, workshop, a mine or oil or gas well, a sales outlet, a warehouse for other persons' storage, and a farm or plantation — reflects the UN Model's broader approach, and an insurance enterprise is separately deemed to have a PE if it collects premiums or insures risks there (other than by reinsurance) through a dependent person.

The treaty runs three separate PE clocks: a construction, installation, or assembly project (or connected supervisory activity) is a PE only past 12 months (Article 5(3)(a), left untouched in 2018); a natural-resource exploration installation, drilling rig, or ship is a PE past 6 months (5(3)(b), cut from 12 months by the 2017 Protocol); and a standalone services PE, inserted as 5(3)(c) by the 2017 Protocol and in force from 2018, arises once furnishing services aggregates more than 90 days in any twelve-month period for the same or a connected project — with an attached understanding that aggregates days across "closely related" enterprises on connected projects, so rotating the contracting entity does not reset the clock.

The MLI layers on more than the bare text shows: a contract-splitting rule aggregates periods over 30 days by the enterprise and by closely related enterprises toward the 12-month construction threshold; the agency PE in Article 5(5) (contract-concluding only, in the treaty text) is broadened to a person who habitually plays the principal role leading to contracts routinely concluded without material change; and the independent-agent carve-out in Article 5(7) is narrowed for persons acting almost exclusively for closely related enterprises. There is no separate deemed-PE article for oilfield services — that exposure runs through the ordinary fixed-place list and the 6-month exploration clock.

Article 7 taxes business profits only in the enterprise's residence State unless a PE exists, and even then only the PE's attributable profits, arm's length, with no force-of-attraction rule. The 1996 Protocol tightens this further for turnkey and EPC contracts, attributing profits only to the part of the contract the PE actually carries out, and Article 7 disallows deducting notional royalties, fees, commission, or interest paid to the enterprise's own head office.

Dividends, Interest, Royalties and Fees for Technical Services

Dividends — Article 10

Dividends may be taxed in the source State but capped at 10% of the gross amount where the recipient is the beneficial owner (Article 10(2)) — a flat rate with no shareholding tier. Article 10(4) diverts the dividend to Article 7 where the holding is effectively connected with a PE. Article 10(6) is easy to miss: once a PE's profits are taxed under Article 7, its State may also tax the remaining amount, capped at the Article 10(2) rate — a treaty-permitted second-tier charge of up to 10% this guide does not confirm either country actually levies.

Interest — Article 11

Interest is capped at 10% where the recipient is also the beneficial owner (Article 11(2)). Article 11(3) fully exempts interest derived and beneficially owned by (i) the Government, a political subdivision, or a local authority of the other State, or (ii) its Central Bank or another governmental bank or institution mutually agreed between the two countries — with no published list of named banks beyond the Central Bank itself. Penalty charges for late payment are excluded from "interest" (Article 11(4)), and interest connected with a PE reverts to Article 7 (Article 11(5)). One quirk: interest on shipping or aircraft funds is treated as Article 8 profit, not Article 11 interest, except for interest on fixed bank deposits.

Royalties and Fees for Technical Services — Article 12

Royalties and FTS share one combined article, both capped at 10% where the recipient is the beneficial owner (Article 12(2)). The royalty definition (12(3)(a)) expressly names software alongside copyright, patents, and trademarks — unusual for a 1990s treaty. FTS (12(3)(b)) covers any managerial, technical, or consultancy payment, including provision of personnel, with no "make available" requirement. Article 12(4) diverts PE-connected royalties to Article 7, but its text names only "royalties," not FTS, unlike the parallel Article 12(6) — a textual gap this guide notes without drawing a conclusion on its practical effect.

Capital Gains

Article 13 allocates gains by asset: immovable property is taxable where situated (13(1)); a PE's business movables, including alienating the PE itself, where the PE sits (13(2)); and ships and aircraft in international traffic only in the alienator's residence State (13(3)).

Paragraph 13(4) has been replaced by Article 9(4) of the MLI. The old text taxed gains on shares of a company "principally" holding immovable property, with no percentage or look-back. The replacement is explicit: gains on shares or comparable interests — including partnership and trust interests — may be taxed where, within the 365 days before sale, they derived more than 50% of value from local immovable property. Never cite the old "principally" wording as current law.

Separately, Article 13(5) gives the company's residence State an unconditional right to tax share gains outside 13(4) — no threshold, no land-rich test. India can tax a Kazakh resident's gain on Indian-company shares at domestic rates (broadly sections 196, 197, and 198 of the Income-tax Act, 2025, successors to sections 111A, 112, and 112A of the 1961 Act) regardless of the company's asset mix. Residual gains fall to Article 13(6), taxable only in the seller's residence State.

Other Income and Employment Income

Employment income (Article 15) is taxable only in the employee's residence State unless exercised elsewhere, subject to a 183-day short-stay exemption; independent personal services (Article 14) use the same 183-day test, not 90 or 120 days as in some other treaties. Article 22 ("Other Income") was changed materially in 2017: alongside the residence-only general rule in 22(1), the Protocol inserted 22(3), letting the other State also tax residual income arising there — a source-state right that did not exist before 2018, so older descriptions of Article 22 as purely residence-based are out of date.

Relief from Double Taxation and Tax Sparing

Article 24 uses the ordinary credit method on both sides, capped at the tax that would have been charged domestically on the same income, with exemption-with-progression separately available. Article 24(5) adds an unusually durable tax-sparing credit: tax spared under either country's incentive laws is deemed paid, provided it relates to industrial or manufacturing profits, or agriculture, fishing, or tourism activity carried out in that country — and, unlike some of India's other tax-sparing clauses, this one carries no expiry date.

Anti-Abuse Rules: Limitation of Benefits, the MLI and GAAR

Article 28A, inserted in 2017, is a compact three-paragraph Limitation of Benefits clause: it preserves domestic anti-avoidance law (28A(1)); denies benefits where obtaining them was a main purpose (28A(2)); and denies benefits to a non-beneficial-owner (28A(3)) — a main-purpose test, not a mechanical US-style LOB.

The MLI adds two further layers most of India's treaty network lacks together: the Principal Purpose Test (PPT), denying benefits where obtaining them was a principal purpose; and, unusually, a Simplified Limitation on Benefits regime both countries also opted into, layering an objective qualified-person/active-business test on top of the PPT. The MLI also adds an anti-treaty-shopping preamble and a rule targeting PEs in third jurisdictions. None of this displaces India's own General Anti-Avoidance Rules (GAAR) under section 159(6) of the Income-tax Act, 2025 (section 90(2A) of the 1961 Act), which Article 28A(1) expressly preserves.

How to Claim Treaty Benefits

A non-resident must obtain a Tax Residency Certificate from their home tax authority — in Kazakhstan, issued by the Kazakhstan tax authorities under the Ministry of Finance, the treaty's named competent authority — then file an electronic Form 41 (formerly Form 10F) declaring status, place of incorporation or nationality, tax ID, and the period covered.

The Indian payer then withholds tax under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961) at the more beneficial of the domestic or treaty rate under section 159(4) (section 90(2) of the 1961 Act), and files Forms 145 and 146 (formerly 15CA/15CB) for the remittance: Form 145 goes in before remitting, and the chartered accountant's Form 146 certificate is needed only for Part C of Form 145 — a taxable remittance above INR 5 lakh made without a section 395 certificate. Where the rate is uncertain, the Kazakh recipient can apply for a lower or nil deduction certificate under section 395(1) (section 197 of the 1961 Act); the Indian payer's own route is section 395(2) (sections 195(2) and 195(3) of the 1961 Act).

Worked Example

An Indian technology company pays a Kazakh vendor USD 100,000, split USD 60,000 royalty and USD 40,000 FTS, with no PE in India and a valid TRC and Form 41 on file. Both fall under Article 12(2) at 10%: USD 6,000 and USD 4,000 withheld, USD 10,000 combined, against USD 20,000 that the domestic 20% rate under section 207(2) (Table, Sl. Nos. 1 and 2) of the Income-tax Act, 2025 would otherwise require. If the vendor also kept staff in India for 100 days on a connected project, the 90-day services PE threshold would be crossed, and PE-attributable profits would shift to Article 7 net-basis taxation instead of the flat 10% rate.

Common Mistakes

The costliest error is citing the treaty's most-favoured-nation clause — deleted by the 2017 Protocol, gone from Indian law since 1 April 2018. Others: conflating the three PE clocks (12 months, 6 months, 90 days); assuming the Article 11(3) interest exemption covers named development banks the way some European treaties do, when it reaches only the Government, its subdivisions, and the Central Bank plus specifically agreed institutions; and treating Article 13(4)'s old "principally immovable property" wording as current when the MLI has replaced it with an explicit 50%/365-day test.

For the full withholding-rate breakdown, see our India to Kazakhstan withholding tax rates page, and for the broader treaty framework, our DTAA master guide.

Frequently Asked Questions

What is the India-Kazakhstan DTAA?

The India-Kazakhstan DTAA is a bilateral tax treaty signed on 9 December 1996 and in force since 2 October 1997 that allocates taxing rights between the two countries over dividends, interest, royalties, fees for technical services, capital gains, business profits, and employment income, applying a uniform 10% withholding rate on the four main categories of passive income.

What is the withholding tax rate on dividends under the India-Kazakhstan DTAA?

Article 10(2) caps dividend withholding at a flat 10% of the gross amount for any beneficial owner resident in the other country, with no shareholding tiers, compared with India's domestic rate of 20% under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961).

Does the India-Kazakhstan DTAA have a most-favoured-nation clause?

No, not anymore. The 1996 Protocol originally contained an MFN clause covering dividends, interest, royalties, and FTS, but Article XIV of the 2017 amending Protocol deleted it, effective in India from 1 April 2018. No third-country rate can be imported through this treaty today.

How does the India-Kazakhstan DTAA define a permanent establishment?

Article 5 sets three separate thresholds: a construction, installation, or assembly project becomes a PE after more than 12 months; a natural-resource exploration installation after more than 6 months; and a standalone services PE, added in 2018, after more than 90 days of activity on the same or a connected project within any 12-month period.

Does the Multilateral Instrument (MLI) apply to the India-Kazakhstan DTAA?

Yes. Both countries listed each other's treaty as a Covered Tax Agreement, so the MLI applies both the Principal Purpose Test and a Simplified Limitation on Benefits regime on top of the treaty's own Article 28A, effective for India-source withholding tax from 1 April 2021.

How are capital gains on shares taxed under the India-Kazakhstan DTAA?

Article 13(5) gives the company's residence State an unconditional right to tax share gains, so India can tax a Kazakh resident's gain on Indian-company shares at domestic rates. Article 13(4), as replaced by the MLI, separately lets the source State tax gains on land-rich entities where more than 50% of value came from local immovable property within the preceding 365 days.