Overview of the India-Saudi Arabia DTAA
The Double Taxation Avoidance Agreement between India and Saudi Arabia was signed at New Delhi on 25 January 2006. It entered into force on 1 November 2006 and applies to income derived on or after that date. The treaty is formally titled the Convention between the Government of the Republic of India and the Government of the Kingdom of Saudi Arabia for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with Respect to Taxes on Income.
The treaty covers Indian income tax (including surcharges) and Saudi Arabian Zakat and income tax (including natural gas investment tax). This dual coverage is important because Saudi Arabia applies different tax regimes to Saudi nationals (Zakat) and foreign entities (income tax at 20%).
The India-Saudi Arabia DTAA is notable for three distinctive features:
- 5% dividend withholding rate -- among the lowest India offers under any treaty. Only a handful of countries, including Singapore and Hong Kong, get comparable rates.
- No Fees for Technical Services (FTS) article -- the treaty does not include a separate provision for FTS, creating a coverage gap that affects consultants and service providers.
- Saudi Arabia's zero personal income tax -- combined with the treaty rates, this creates one of the most tax-efficient corridors for individual investors, particularly the 2.75 million NRIs living in Saudi Arabia.
The treaty uses the credit method to eliminate double taxation. If income is taxed in both countries, the country of residence provides a credit for taxes paid in the source country.
Treaty History and Current Status
The India-Saudi Arabia DTAA has one major milestone and one recent development:
Original Convention (2006): Signed on 25 January 2006 at New Delhi during the visit of King Abdullah bin Abdulaziz Al Saud to India. The treaty entered into force on 1 November 2006. This was part of a broader strengthening of India-Saudi bilateral ties under the Delhi Declaration of 2006.
Unlike the India-Israel DTAA (which has been amended by a 2015 Protocol), the India-Saudi Arabia treaty has not been amended by any protocol. The original 2006 text, as modified by the MLI, represents the current legal framework.
Multilateral Instrument (MLI) Impact: India signed the MLI on 7 June 2017, and it entered into force for India on 1 October 2019. Saudi Arabia signed the MLI on 18 September 2018 (making it one of the later signatories among G20 nations), and it entered into force for Saudi Arabia on 1 May 2020. The MLI modifies the treaty to incorporate BEPS minimum standards, including anti-abuse provisions.
The bilateral relationship has deepened significantly since the treaty was signed. The USD 100 billion strategic partnership agreement signed in April 2025, the launch of GCC-India FTA negotiations in February 2026, and the growing PIF (Public Investment Fund) investments in Indian companies all point to increasing cross-border capital flows that make the DTAA more relevant than ever.
Key Treaty Articles
The India-Saudi Arabia DTAA follows a structure influenced by both the OECD and UN Model Conventions, with some provisions specific to the bilateral context.
Article 7: Business Profits
Business profits of a Saudi enterprise are taxable only in Saudi Arabia unless the enterprise carries on business in India through a Permanent Establishment (PE). If a PE exists, India can tax only the profits attributable to that PE. The arm's length principle governs profit attribution.
Article 10: Dividends
Dividends paid by an Indian company to a Saudi resident may be taxed in India, but the withholding tax shall not exceed 5% of the gross amount if the recipient is the beneficial owner. This is a flat rate -- no tiered structure based on shareholding percentage. The 5% rate provides a 75% reduction from the domestic rate of 20%.
Article 11: Interest (Income from Debt-Claims)
Interest arising in India and paid to a Saudi resident may be taxed in India at a rate not exceeding 10% of the gross amount. Interest paid to or guaranteed by the Government of Saudi Arabia, the Saudi Arabian Monetary Authority (SAMA, now the Saudi Central Bank), or certain government-owned financial institutions is exempt from Indian tax.
Article 12: Royalties
Royalties arising in India and paid to a Saudi beneficial owner are taxable at not more than 10% of the gross amount. The term covers payments for the use of copyright, patents, trademarks, designs, models, plans, secret formulas, and industrial, commercial, or scientific experience.
Fees for Technical Services: The Missing Article
The India-Saudi Arabia DTAA does not include a separate article on Fees for Technical Services. This is unusual compared to most other Indian DTAAs. The practical implications are significant:
- If a Saudi resident provides technical, managerial, or consultancy services to an Indian client without a PE in India, the income falls under the business profits article (Article 7) and is taxable only in Saudi Arabia.
- If such services create a PE in India, the profits attributable to the PE are taxable in India at regular corporate rates.
- In the absence of a specific treaty provision, India may apply domestic law rates under Section 115A (20% for royalties/FTS paid to non-residents since the Finance Act 2023, up from 10%), but the treaty's business profits article may override this for genuine business activities without a PE.
This creates a planning opportunity for Saudi-based consultants, but it also creates uncertainty. The characterization of payments as business profits versus FTS versus royalties becomes critically important.
Article 13: Capital Gains
The capital gains article provides several layers of taxation rights:
- Immovable property (Paragraph 1): Gains from alienation of immovable property situated in India are taxable in India.
- PE-related property (Paragraph 2): Gains from movable property forming part of a PE's business property in India are taxable in India.
- Ships and aircraft (Paragraph 3): Gains from ships or aircraft operated in international traffic are taxable only in the country of residence.
- Shares deriving value from immovable property (Paragraph 4): Gains from shares of a company whose property consists directly or indirectly principally of immovable property in India may be taxed in India.
- Other shares (Paragraph 5): Gains from alienation of shares in an Indian company may be taxed in India. This is broader than many DTAAs and gives India taxing rights on most share transfers.
- Residual provision (Paragraph 6): Gains from alienation of any other property are taxable only in the country of residence.
Withholding Tax Rates Summary
| Income Type | DTAA Rate | Domestic Rate (Without Treaty) | Savings | Article |
|---|---|---|---|---|
| Dividends | 5% | 20% | 75% | Article 10 |
| Interest | 10% | 20% | 50% | Article 11 |
| Royalties | 10% | 20% | 50% | Article 12 |
| FTS | No specific article | 20% (Section 115A) | Varies | N/A |
The 5% dividend rate is the headline number. For NRIs in Saudi Arabia who pay zero personal income tax in the Kingdom, dividends from their Indian company are effectively taxed at just 5% total. This is one of the most tax-efficient dividend corridors India offers.
For detailed rate breakdowns and compliance steps, see our dedicated page: Withholding Tax Rates: India to Saudi Arabia.
Permanent Establishment Rules
Article 5 of the India-Saudi Arabia DTAA defines when a Saudi enterprise has a PE in India. The definition follows the UN Model Convention approach, which gives broader taxing rights to the source country compared to the OECD Model.
A PE includes a fixed place of business through which an enterprise wholly or partly carries on its business. Standard inclusions: offices, branches, factories, workshops, mines, quarries, oil or gas wells, and other places of natural resource extraction.
Construction PE: A building site, construction, assembly or installation project, or supervisory activities in connection therewith constitutes a PE only if such site, project, or activity lasts more than 182 days. This is the UN Model approach, which gives the source country broader taxing rights than the OECD's 12-month standard. Given the large-scale infrastructure projects planned under the USD 100 billion partnership, Saudi construction companies should monitor project durations carefully.
Service PE: The furnishing of services, including consultancy services, by a Saudi enterprise through employees or other personnel in India constitutes a PE if such activities continue for a period or periods aggregating more than 182 days within any 12-month period. This service PE provision is particularly relevant given the absence of an FTS article.
Agency PE: A person acting on behalf of a Saudi enterprise in India may constitute a dependent agent PE if they habitually exercise authority to conclude contracts. Independent agents acting in the ordinary course of their business are excluded.
Saudi companies bidding on Indian infrastructure projects, PIF portfolio companies establishing India operations, and Saudi service providers deploying personnel in India should all evaluate their PE exposure before commencing operations.
Tax Residency and Certificate Requirements
To claim treaty benefits, documentation requirements are strict:
For Saudi residents: Obtain a Tax Residency Certificate (TRC) from ZATCA (Zakat, Tax and Customs Authority, formerly GAZT). For individuals, residency is based on having a valid iqama and physical presence in Saudi Arabia for at least 183 days in the fiscal year. For companies, a valid Commercial Registration (CR) and Saudi tax registration are required.
For NRIs in Saudi Arabia: NRIs holding Indian passports but residing in Saudi Arabia need to establish Saudi tax residency to claim treaty benefits. This requires the 183-day presence test and a TRC from ZATCA. The fact that Saudi Arabia has no personal income tax does not prevent the issuance of a TRC -- ZATCA provides residency certificates for treaty purposes.
Form 10F: In addition to the TRC, Form 10F must be filed electronically on the Indian Income Tax portal. This self-declaration provides the taxpayer's residency details, country of residence, and Tax Identification Number.
Both documents must be in place before the first payment from which reduced withholding is claimed. Documents in Arabic must be accompanied by a certified English translation -- MCA and the Income Tax Department require submissions in English.
Mutual Agreement Procedure (MAP)
Article 24 of the India-Saudi Arabia DTAA provides for a Mutual Agreement Procedure when taxation is not in accordance with the treaty.
The process allows a resident of either Contracting State to present their case to the competent authority of their country of residence within three years of the first notification of non-compliant taxation. The competent authorities then endeavor to resolve the case through mutual consultation.
In India, the competent authority is the CBDT (Central Board of Direct Taxes). In Saudi Arabia, it is the Minister of Finance or an authorized representative. MAP cases involving India-Saudi Arabia disputes typically relate to PE attribution, transfer pricing adjustments, and the characterization of payments (particularly the FTS/business profits distinction).
The absence of a specific FTS article makes MAP particularly relevant for Saudi-based consultants and service providers whose income characterization may be disputed by Indian tax authorities.
How to Claim Treaty Benefits
Claiming benefits under the India-Saudi Arabia DTAA follows the standard Indian procedure:
Step 1: Obtain TRC from ZATCA
Apply to the Zakat, Tax and Customs Authority for a Tax Residency Certificate. For individuals, you need a valid iqama and proof of 183-day presence. For companies, a Commercial Registration and tax registration with ZATCA are required. Processing time: 2-4 weeks.
Step 2: File Form 10F
Submit Form 10F electronically on the Indian Income Tax e-filing portal. Required details include name, status, nationality, TIN, period of residency, and Saudi address.
Step 3: Provide Documentation to Indian Payer
Submit TRC, Form 10F, and beneficial ownership declaration to the Indian entity making the payment. The payer applies the treaty rate (5% for dividends, 10% for interest and royalties) under Section 195.
Step 4: Form 15CA/15CB
The Indian payer files Form 15CA online and obtains a CA certificate in Form 15CB before making the remittance. The Authorized Dealer bank requires these documents to process the outward transfer.
Step 5: Claim Foreign Tax Credit
Saudi entities that have paid Indian tax can claim a credit. For companies, the credit applies against Saudi corporate income tax (20% for foreign entities). For individuals, since Saudi Arabia has no personal income tax, the Indian tax is the only tax -- there is no double taxation for individuals to eliminate.
For comprehensive guidance on structuring your India entry from Saudi Arabia, see our Saudi Arabia country guide. For professional assistance, our tax advisory and FEMA compliance teams handle the end-to-end process.
Frequently Asked Questions
Is the 5% dividend rate the lowest India offers under any DTAA?
It is among the lowest. Very few Indian DTAAs offer 5% on dividends. Saudi Arabia, Singapore, and Hong Kong are in this group. Most Indian treaties set the dividend rate at 10% or 15%. For NRIs in Saudi Arabia who pay zero personal income tax, the effective total tax on dividends is just 5% -- making this one of the most tax-efficient dividend corridors available.
Why is there no FTS article in the India-Saudi Arabia DTAA?
The 2006 treaty was negotiated without a specific Fees for Technical Services article. This omission means technical and consultancy service fees paid to Saudi residents do not have a dedicated treaty rate. Such income is either classified as business profits under Article 7 (taxable in India only if a PE exists) or falls under India's domestic withholding rate of 20% under Section 115A. Saudi-based consultants should structure their engagements carefully to manage this gap.
How does the absence of Saudi personal income tax affect DTAA benefits?
Saudi Arabia does not levy personal income tax on individuals. For NRIs earning Indian income, this means the India-side tax is the only tax. Dividends are taxed at 5% (India withholding) and 0% (Saudi tax) for a total of 5%. Interest is taxed at 10% total. This makes Saudi Arabia one of the most tax-efficient residency jurisdictions for receiving Indian income.
What is the PE threshold for Saudi construction companies working in India?
A building site, construction, assembly or installation project, or supervisory activities constitutes a PE if it lasts more than 182 days. Given the massive infrastructure commitments under the USD 100 billion partnership, Saudi construction companies deploying to India should track project durations and consider structuring to manage PE exposure.
How do I get a TRC from ZATCA?
Apply to the Zakat, Tax and Customs Authority. Individuals need a valid iqama and evidence of 183-day physical presence in Saudi Arabia during the relevant fiscal year. Companies need a valid Commercial Registration and active tax registration with ZATCA. Processing typically takes 2-4 weeks. The TRC must be renewed annually.
Does the MLI affect the India-Saudi Arabia DTAA?
Yes. Both countries have signed and ratified the MLI. India's MLI entered into force on 1 October 2019, and Saudi Arabia's on 1 May 2020. The MLI modifies the treaty to incorporate BEPS minimum standards, including the Principal Purpose Test for preventing treaty abuse. The specific MLI provisions applicable depend on the reservations and notifications made by both countries.
Can Saudi PIF portfolio companies claim treaty benefits for their India investments?
PIF (Public Investment Fund) portfolio companies can claim treaty benefits if they are residents of Saudi Arabia for treaty purposes and meet the beneficial ownership requirement. The entity must demonstrate genuine economic substance in Saudi Arabia. Investments routed through third-country holding structures may be challenged under GAAR or the MLI's Principal Purpose Test.
Saudi Arabia — Dividend Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Beneficial owner of dividends, regardless of shareholding percentage | 5% | 20% | Article 10(2) |
Saudi Arabia — Interest Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Beneficial owner of interest income | 10% | 20% | Article 11(2) |
| Government/Central Bank Interest paid to or guaranteed by the Government, Central Bank (SAMA/RBI), or government-owned financial institutions | Exempt | 20% | Article 11(3) |
Saudi Arabia — Royalty Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Beneficial owner of royalties; covers copyright, patents, trademarks, designs, plans, secret formulas, industrial/commercial/scientific experience | 10% | 20% | Article 12(2) |