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

Quick answer: The India-Oman DTAA caps dividends at 10% (10%+ shareholding) or 12.5% (all other cases), interest at 10% (with government and Central Bank interest exempt), and — following a 25 June 2025 amendment — royalties and technical fees at 10% each, down from 15%. Signed on 2 April 1997 and in force from 3 June 1997, the treaty uses shifted article numbering (dividends Article 11, interest Article 12, royalties Article 13, technical fees Article 14, capital gains Article 15) and is not a Covered Tax Agreement under the Multilateral Instrument (MLI), because Oman never listed India.

Key takeaways:

• Dividends: 10% (10%+ shareholding) or 12.5% (other cases) — Article 11(2)
• Interest: 10% flat, with exemptions for government/Central Bank interest and approved transactions — Article 12
• Royalties and technical fees cut 15% to 10%, effective 25 June 2025 (Notification S.O. 2858(E))
• Technical fees sit in a standalone Article 14, no make-available requirement
• Not a Covered Tax Agreement under the MLI — anti-abuse runs through the treaty’s own Article 27B PPT

Overview of the India-Oman DTAA and Article Numbering

The Double Taxation Avoidance Agreement (DTAA) between India and Oman prevents the same income being taxed twice and allocates taxing rights between the two States. Signed at New Delhi on 2 April 1997, it covers double taxation relief on income only — no capital or wealth-tax article — and was substantially amended once, in 2025.

The single most important thing to know before reading this treaty is that its numbering is shifted relative to the OECD Model: dividends sit in Article 11, interest in Article 12, royalties in Article 13, technical fees in a standalone Article 14, and capital gains in Article 15. Article 10 is not dividends here — it deals with associated enterprises, and this is the most common mistake in summaries of the treaty.

Treaty History, the 2025 Amendment, and Current Status

The India-Oman DTAA was signed at New Delhi on 2 April 1997, with the English text prevailing on divergence. It entered into force on 3 June 1997 (S.O. 563(E), 23 September 1997), effective in India from 1 April 1998 and in Oman from 1 January 1998. It replaced a narrower 1984 agreement covering only international-transport income.

The treaty was untouched for 28 years until Notification S.O. 2858(E), dated 25 June 2025 — its only amending instrument — cut royalty and technical-fee withholding from 15% to 10%, removed tax sparing, inserted a bilateral Principal Purpose Test as Article 27B, rewrote the dual-residence tie-breaker for non-individuals, added an assistance-in-the-collection-of-taxes article (Article 27A), and modernised non-discrimination, MAP and exchange-of-information. Articles 5, 7, 9, 11 (dividends), 12 (interest) and 15 (capital gains) were left unamended.

Both India and Oman have ratified the OECD’s Multilateral Convention (the MLI). India listed Oman as a Covered Tax Agreement, but Oman’s own MLI position does not list India, and a treaty is modified only when both parties list it. The DTAA is therefore not a Covered Tax Agreement — no MLI provision, including the MLI Principal Purpose Test, applies. This is why the 2025 amendment modernised the treaty’s anti-abuse rules directly.

The treaty follows a Hybrid model: OECD-style business-profits and capital-gains provisions alongside UN Model influences — the 6-month construction PE threshold and a standalone technical-fees article with no make-available limb.

Who the Treaty Covers: Residence and Dual-Resident Entities

Article 4 defines residence by each country’s domestic tax law. Dual-resident individuals use the usual cascading tie-breaker: permanent home, centre of vital interests, habitual abode, nationality, and finally mutual agreement between the competent authorities.

For dual-resident entities, the 2025 amendment replaced the old place-of-effective-management test in Article 4(3) with a competent-authority mutual agreement procedure, weighing place of effective management, place of incorporation and other factors — none decisive alone. Critically, if the competent authorities cannot agree, the entity gets no treaty relief or exemption at all, except as they may agree — materially stricter than the old automatic rule.

Permanent Establishment Rules

Article 5 (unamended in 2025) defines a PE as a fixed place of business, including a place of management, branch, office, factory, workshop, mine, oil or gas well, or quarry.

Construction PE — more than 6 months

A building site or construction or assembly project, or supervisory activity connected with it, is a PE only where it continues more than 6 months (Article 5(2)(g)). The treaty uses "assembly", not "installation" — that word appears nowhere — and supervisory activity falls inside the same 6-month test, with no separate threshold.

No services PE, no oil-and-gas deemed PE

Unlike many of India’s more recent treaties, this DTAA has no services PE clause at all — no 90-day or 183-day test for furnishing services through personnel. Cross-border services instead reach India through Article 14 (10% of gross fees) or Article 7 if a PE otherwise exists. There is no oil-sector deemed-PE clause either; a mine, oil or gas well, or quarry is simply a listed fixed-place PE under Article 5(2)(f).

Preparatory or auxiliary activities

Article 5(3) excludes the usual pre-BEPS preparatory-or-auxiliary list: storage, display or delivery of goods; stock for storage, display, delivery or processing by another enterprise; purchasing or information-collecting; and any other preparatory or auxiliary activity. Because the MLI does not touch this treaty, none carries the MLI’s "provided the activity is preparatory or auxiliary" overlay — each is unqualified as written.

Agency PE — single limb only

Article 5(4) creates an agency PE only through a dependent person who "has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise" — narrower than a typical three-limb Indian clause, with no stock-maintenance-and-delivery limb and no habitually-securing-orders limb. An independent broker or agent acting in the ordinary course of business is excluded under Article 5(5).

Business Profits — Article 7

Business profits of an enterprise of one Contracting State are taxable only in that State, unless the enterprise carries on business in the other State through a PE. Where a PE exists, only the profits attributable to it may be taxed in the source country, computed on an arm’s-length basis as a distinct, independent enterprise.

Dividends — Article 11

Article 11(2) sets two dividend tiers, unusual among India’s treaties: 10% where the beneficial owner is a company owning at least 10% of the paying company’s shares (Article 11(2)(a)), and 12½ per cent "in all other cases" (Article 11(2)(b)) — a half-percentage-point residual tier, best written as 12.5%. Both sit well below India’s 20% domestic rate under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961). Where the holding is effectively connected with a PE or fixed base, Article 11(4) instead routes the income to Article 7 or Article 16.

Interest — Article 12

Article 12(2) caps interest at a flat 10%, with a single cap and no separate bank tier. Article 12(3) then carves out two exemptions — neither limb names a single bank, fund or financial institution, so never import a named-institution list from another treaty.

• Article 12(3)(a) — recipient-side, self-executing: exempt in the source State where derived and beneficially owned by the Government, a political sub-division or local authority of the other State, or by that State’s Central Bank — described by function, never by name.
• Article 12(3)(b) — approved transaction, discretionary: interest owed to any other resident of the other State is exempt only "to the extent approved by the Government of that Contracting State", and only where "the transaction giving rise to the debt-claim has been approved in this regard by the Government of the first-mentioned Contracting State" — a source-State approval of the underlying transaction, not a blanket exemption for banks or lenders.

Article 12(4) defines interest broadly — debt-claims of every kind, government securities, bonds, debentures, attached premiums or prizes — but excludes late-payment penalty charges: "Penalty charges for late payment shall not be regarded as interest for the purpose of this Article." Interest connected with a PE falls instead under Article 12(5) as business profits.

Royalties — Article 13

Article 13(2) caps royalty withholding at 10% of the gross amount, beneficial ownership required. This is a substantial reduction from the previous 15% rate: the words "15 per cent" were substituted with "ten per cent 10%" by Notification S.O. 2858(E), with effect from 25 June 2025. Any source describing a 15% royalty rate for Oman today is describing repealed law. The definition of royalties in Article 13(3) is the familiar OECD-style list — copyright of literary, artistic or scientific work (including films and broadcast tapes), patents, trademarks, designs, secret formulas or processes, and industrial, commercial or scientific equipment or experience.

Technical Fees — Article 14 (Standalone, No Make-Available)

Unlike Germany’s or Singapore’s treaties, where technical fees sit inside the royalties article, the India-Oman DTAA gives technical fees their own standalone Article 14, capped at 10% by Article 14(2) — cut from 15% by the same 2025 notification. Article 14(3) defines them as "payments of any kind to any person, other than to an employee of the person making the payments, in consideration for any services of a technical, managerial or consultancy nature."

Three points distinguish this from the US/UK/Singapore family of treaties: there is no make-available requirement, so bare technical, managerial or consultancy services are taxable at 10% whether or not know-how transfers to the payer; managerial and consultancy services are expressly covered, not just technical; and the only carve-out is payment to an employee of the payer, which falls to Article 17 instead. Fees connected with a PE or fixed base fall to Article 7 or Article 16 under Article 14(4).

For a complete rate-by-rate breakdown, see our India to Oman withholding tax rates page.

Capital Gains — Article 15

Article 15 (unamended in 2025) allocates taxing rights over gains by asset class:

Two features catch investors out: Article 15(4) uses "principally" with no percentage threshold or valuation-date rule — no "50% land-rich test" to apply mechanically — and Article 15(5) has no shareholding threshold, so India may tax an Omani resident’s gains on any Indian-company shares, with no grandfathering date. Ship/aircraft gains under Article 15(3) follow the alienator’s residence, not effective-management.

Elimination of Double Taxation and the End of Tax Sparing

Article 25(2) requires India to give an ordinary tax credit for Omani income tax, capped at the Indian tax attributable to that income; Article 25(3) mirrors this for Oman. Article 25(4) (renumbered in 2025) also allows exemption with progression.

Before 25 June 2025, Article 25(4) also contained a tax-sparing provision — a reciprocal deemed credit, under which the tax payable in a Contracting State under Article 25(2) and 25(3) was "deemed to include the tax which would have been payable but for the tax incentives granted under the laws of the Contracting State and which are designed to promote economic development". That provision has been deleted by the 2025 amendment; any statement describing an available Oman tax-sparing credit today describes repealed text.

Anti-Abuse: the Bilateral Principal Purpose Test (Article 27B)

Because this DTAA is not a Covered Tax Agreement under the MLI, India and Oman inserted an anti-abuse rule directly into the text in 2025 — a new Article 27B, "Entitlement to Benefits", reading in full: "Notwithstanding the other provisions of this Agreement, a benefit under this Agreement shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of this Agreement."

This is a bilateral PPT specific to this Agreement, not the MLI’s PPT — cite it as Article 27B, never "the MLI PPT". The treaty has no Limitation of Benefits article, so Article 27B is the only dedicated anti-abuse provision, alongside India’s domestic GAAR under section 159(6) of the Income-tax Act, 2025 (section 90(2A) of the Income-tax Act, 1961). There is also no most-favoured-nation clause anywhere in the Agreement or Protocol.

How to Claim Treaty Benefits

An Omani resident claiming reduced withholding on Indian-source income needs, in sequence:

1. Tax Residency Certificate: obtain a TRC from the Oman Tax Authority (the Chairman of the Tax Authority, per Article 3(1)(e)); the Indian-side requirement is section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961).
2. File Form 41 (formerly Form 10F), giving status, tax ID and residence period. See our Form 41 glossary entry.
3. Self-declare beneficial ownership and, where relevant, that no PE exists in India.
4. Payer compliance: the Indian payer deducts 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 treaty rate and files Form 145 before remitting. Form 146 is needed only for a Part C remittance — taxable and above INR 5,00,000 — made without a section 395 certificate.
5. Lower Withholding Certificate (if needed): apply under section 395(1) (section 197 of the 1961 Act) for a certificate specifying the rate in advance.

Related-party dealings with an Omani associate are separately reportable on Form 48 (formerly Form 3CEB). The more-beneficial-rate rule is section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961).

Worked Example: Technical Fees Paid to an Omani Consultancy

An Indian manufacturer engages an Omani consultancy for managerial and technical advisory on a plant upgrade, fee INR 50,00,000. The consultancy has no PE in India and does not employ the consultants as its own staff.

Under Article 14(3), this is a "technical fee" — payment for technical and managerial services to a non-employee — and since the treaty has no make-available requirement, it doesn’t matter whether know-how is transferred. Under Article 14(2), Indian withholding is capped at 10% (INR 5,00,000), provided the consultancy furnishes a valid TRC and files Form 41; without them, the payer withholds at the 20% domestic rate under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 — INR 10,00,000 — until refunded. Form 145 is filed before remitting the balance.

Common Mistakes

• Citing the pre-2025 rate: 15% royalty/technical-fee rate was replaced by 10% from 25 June 2025 — update contracts and TDS calculations for later payments.
• Applying OECD article numbers: the shifted numbering means "Article 10" is Associated Enterprises here, and "Article 12" is Interest, not royalties.
• Assuming MLI coverage: both countries are MLI signatories, but Oman never listed India, so no MLI provision applies. The relevant anti-abuse rule is the treaty’s own Article 27B.
• Treating Article 12(3)(b) as a blanket bank exemption: it is a discretionary, transaction-specific approval, not a standing exemption for banks or lenders.
• Applying a percentage threshold to the land-rich test: Article 15(4) uses "principally" with no fixed percentage — never apply a 50% threshold.

Frequently Asked Questions

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

Article 11(2) sets two tiers: 10% of the gross dividend where the beneficial owner is a company holding at least 10% of the paying company's shares, and 12.5% in all other cases. Both are below India's 20% domestic rate under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025.

Has the royalty and technical-fee rate under the India-Oman DTAA changed recently?

Yes. Notification S.O. 2858(E), effective 25 June 2025, cut both the royalty rate (Article 13(2)) and the technical-fee rate (Article 14(2)) from 15% to 10%. The same notification also removed tax sparing and inserted a new Article 27B Principal Purpose Test.

Does the MLI apply to the India-Oman DTAA?

No. Although both India and Oman are MLI parties, Oman did not list its treaty with India as a Covered Tax Agreement, and a treaty is modified by the MLI only if both sides list it. No MLI provision, including the MLI Principal Purpose Test, applies to this treaty. Anti-abuse instead runs through the treaty's own bilateral Article 27B, inserted in 2025.

Is there a services PE clause in the India-Oman DTAA?

No. The treaty has no furnishing-of-services PE test of any kind — no 90-day or 183-day threshold. Cross-border services are taxed either as technical fees under Article 14 at 10% of gross fees, or under Article 7 if a fixed-place or agency PE otherwise exists.

How are gains on shares of an Indian company taxed under this treaty?

Article 15(4) lets India tax gains on "land-rich" shares (companies whose property consists principally, directly or indirectly, of Indian immovable property), with no fixed percentage threshold. Article 15(5) additionally lets India tax gains on any other shares in an Indian-resident company, with no minimum shareholding requirement and no grandfathering date.

What documents does an Omani resident need to claim reduced withholding in India?

A Tax Residency Certificate issued by the Oman Tax Authority, an electronically filed Form 41 (formerly Form 10F), and a self-declaration of beneficial ownership and, where relevant, no PE in India. The Indian payer must separately file Form 145 before remitting the payment, and Form 146 only where the remittance falls in Part C — taxable and above INR 5,00,000 without a section 395 certificate.