Withholding Tax Rates: India to Australia (2026)

India to Australia Withholding Tax Rates Under DTAA

When an Indian company makes a payment to an Australian resident — whether for dividends, interest, royalties, or services — it must deduct tax at source under Section 195 of the Income Tax Act. The India-Australia DTAA, signed on 25 July 1991 and effective from 30 December 1991, reduces these withholding rates significantly compared to domestic law. Under Section 90(2) of the Income Tax Act, the non-resident can apply whichever rate is more beneficial: the domestic rate or the DTAA rate.

The table below provides a quick reference for all withholding tax rates applicable to payments from India to Australia.

Dividend Withholding Rates

Under Article 10 of the India-Australia DTAA, dividends paid by an Indian company to an Australian resident are subject to a maximum withholding tax of 15% of the gross amount. This is a flat rate — unlike the India-Singapore DTAA (which offers 10% for holdings of 25%+) or the India-Mauritius DTAA (5% for holdings of 10%+), the India-Australia treaty does not provide a reduced rate for substantial shareholdings.

For an Indian company distributing dividends to an Australian parent or investor, the saving is approximately 6.84 percentage points compared to the domestic rate of 20% plus applicable surcharge and cess. On a dividend distribution of INR 1 crore, this translates to a tax saving of approximately INR 6.84 lakh.

Important Note on Domestic Rate

The domestic withholding rate of 20% is the base rate under Section 115A of the Income Tax Act. For foreign companies, surcharge at 2% (income between INR 1 crore and INR 10 crore) or 5% (income above INR 10 crore) plus 4% health and education cess is added, making the effective rate approximately 20.8% to 21.84%. When applying the DTAA rate, surcharge and cess do not apply, so the effective saving is larger than the headline rate difference.

Interest Withholding Rates

Article 11 of the India-Australia DTAA caps the withholding tax on interest at 15% of the gross amount. This applies to interest on loans, bonds, debentures, and other debt instruments paid by an Indian company to an Australian resident.

The 15% ceiling is flat: the treaty provides no concessional rate for banks or financial institutions and no exemption for interest paid to governments or central banks, so the same rate applies to every category of Australian lender.

For intercompany loans between an Indian subsidiary and its Australian parent, the DTAA rate of 15% applies provided the interest rate itself is at arm's length under transfer pricing rules. If the interest rate is found to be excessive, the excess may be disallowed under transfer pricing provisions, and the remaining amount would still attract 15% withholding.

Royalty & FTS Withholding Rates

The India-Australia DTAA establishes a two-tier royalty structure under Article 12:

• 15% for royalties paid for use of copyright, patent, design, model, plan, secret formula, process, or trademark, and for the supply of scientific, technical, industrial, or commercial knowledge or information (know-how). This covers the majority of IP licensing arrangements between Australian and Indian entities.
• 10% for royalties paid for the use of industrial, commercial, or scientific equipment, and for technical services ancillary and subsidiary to the enjoyment of that equipment. This lower rate benefits equipment leasing arrangements.

No Separate FTS Article — A Significant Advantage

The India-Australia DTAA does not contain a separate article for Fees for Technical Services (FTS). This is a critical distinction from many other Indian DTAAs. Technical services that fall within the broad definition of royalties under Article 12 are taxed at the applicable royalty rate (10% or 15%). However, standalone technical, consultancy, or managerial services that do not involve the transfer or use of IP, equipment, or know-how are classified as business profits under Article 7.

Under Article 7, business profits are taxable in India only if the Australian provider has a PE in India. If no PE exists, the fees are not taxable in India at all. This makes the India-Australia DTAA one of the more favourable treaties for Australian consulting, engineering, and professional services firms that serve Indian clients remotely from Australia.

Capital Gains Treatment

Capital gains under the India-Australia DTAA (Article 13) are treated as follows:

• Immovable property: Gains taxable in the country where the property is situated.
• Movable property of a PE: Gains taxable where the PE is situated.
• Ships/aircraft in international traffic: Gains taxable only in the country of residence.
• Shares deriving value principally from immovable property: May be taxed in the country where the property is located (Article 13(4)).
• Other shares: May be taxed in the country in which the company is resident (Article 13(5)), so India can tax gains on shares of Indian companies.
• Any other gains: Each country may tax under its own domestic law (Article 13(6)).

For Australian investors selling shares in Indian companies, the India-Australia DTAA offers no residence-only shelter: under Article 13(5), gains on shares of an Indian company may be taxed in India even where the company is not land-rich, and Article 13(6) preserves each country's domestic law for other assets. Indian capital gains tax therefore applies at domestic rates, with a foreign income tax offset available in Australia for the Indian tax paid.

How to Apply Reduced Rates

To apply the DTAA rates on payments from India to Australia, the following compliance steps must be completed:

Step 1: Obtain a Tax Residency Certificate (TRC)

The Australian recipient must obtain a TRC from the Australian Taxation Office (ATO). The application is submitted through the ATO's online services portal, and processing typically takes 2-4 weeks. The TRC must confirm Australian tax residency for the relevant financial year.

Step 2: File Form 10F

The recipient (or their Indian representative) files Form 10F electronically on the Indian income tax e-filing portal (incometax.gov.in). This self-declaration form captures the recipient's status, nationality, TIN, period of residency, and address in Australia.

Step 3: Provide Documents to Indian Payer

The Australian recipient provides the TRC, Form 10F, a beneficial ownership declaration, and (where relevant) a no-PE declaration to the Indian company making the payment.

Step 4: Indian Payer Deducts TDS at DTAA Rate

With valid documentation in hand, the Indian payer deducts TDS at the applicable DTAA rate instead of the higher domestic rate.

Step 5: File Form 15CA/15CB

The Indian payer must file Form 15CA electronically before processing the foreign remittance. If the remittance (or aggregate remittances to the same recipient during the financial year) exceeds INR 5 lakh, a chartered accountant's certificate in Form 15CB is mandatory. The authorised dealer bank will not process the remittance without a valid Form 15CA.

Step 6: Section 197 Lower Deduction Certificate (Optional)

If the Australian recipient's actual tax liability is lower than the TDS deductible (e.g., due to losses or deductions), the recipient can apply to the Indian Assessing Officer for a lower or nil withholding certificate under Section 197 by filing Form 13 on the TRACES portal.

Domestic Rates vs Treaty Rates Comparison

The table below shows the effective tax rate difference between domestic law and the DTAA for a typical payment of INR 1 crore from an Indian company to an Australian resident:

For an Australian company receiving INR 5 crore annually across these income types, the DTAA could save INR 50-100 lakh per year in Indian withholding taxes.

Common Mistakes & Compliance Tips

• Applying DTAA rates without collecting the TRC first: The Indian payer must have the Australian TRC, Form 10F, and beneficial ownership declaration before the payment date. If these documents are not available, the payer must apply the higher domestic rate and the Australian recipient can file an Indian tax return to claim a refund — a process that typically takes 12-24 months.
• Classifying standalone technical services as royalties: Since the India-Australia DTAA does not have a separate FTS article, standalone technical services should be classified as business profits under Article 7, not royalties under Article 12. Incorrectly applying the 15% royalty rate to services that qualify for Article 7 treatment means overpaying tax.
• Filing the wrong part of Form 15CA: Part A is only valid when aggregate remittances to the same recipient during the financial year are below INR 5 lakh. Once the INR 5 lakh threshold is crossed, Part C (with Form 15CB from a CA) is required. Filing the wrong part triggers penalties under Section 271I (INR 1 lakh).
• Ignoring the two-tier royalty structure: Payments for equipment use (and services ancillary to that equipment) qualify for the lower 10% rate, not the 15% rate applicable to IP and know-how royalties. Ensure the payment is correctly categorised to benefit from the lower rate where applicable.
• Not verifying beneficial ownership: Under the MLI's PPT provisions, treaty benefits can be denied if the Australian entity is not the beneficial owner of the income or if the arrangement lacks business substance. Conduit arrangements routed through Australia solely for treaty benefits are at risk of challenge.
• Forgetting the PAN requirement: Under Section 206AA, if the non-resident does not furnish a PAN, TDS must be deducted at 20% or the applicable rate, whichever is higher. However, non-residents are exempt from the higher Section 206AA rate for interest, royalty, FTS, and capital gains if they provide their name, email, address, and TRC as prescribed by CBDT notification.

Frequently Asked Questions

What TDS rate should an Indian company apply on royalty payments to an Australian company for software licensing?

Software licensing royalties typically fall under the copyright category in Article 12(2)(b) of the India-Australia DTAA, attracting a rate of 15%. However, if the payment is characterised as consideration for use of computer software (which the Indian tax authorities sometimes treat as royalty under Section 9(1)(vi)), the 15% DTAA rate would apply. Always ensure the TRC and Form 10F are collected before payment.

Is surcharge and cess applicable on DTAA rates?

No. When applying DTAA treaty rates, surcharge and health & education cess are not added. The DTAA rate is the final rate. This is a settled legal position confirmed by multiple tribunal and court decisions in India.

What happens if the TRC is not available at the time of payment?

The Indian payer must deduct TDS at the higher domestic rate (20% + surcharge + cess). The Australian recipient can subsequently file an Indian income tax return to claim a refund of the excess TDS, but this process typically takes 12-24 months.

Can an Australian individual earning rental income from Indian property claim DTAA benefits?

Rental income from immovable property in India is taxable in India under Article 6 of the DTAA. The DTAA does not reduce the Indian tax rate on rental income — Indian domestic rates apply. The Australian individual claims a foreign income tax offset in Australia for the Indian tax paid.

Are payments for advertising services to an Australian company taxable in India?

Advertising services do not typically fall within the definition of royalties under Article 12 of the India-Australia DTAA. If the Australian company has no PE in India, such payments would be classified as business profits under Article 7 and would not be taxable in India. The Equalisation Levy, which used to sit alongside the treaty analysis for digital advertising and e-commerce payments, is no longer a live consideration: the 2% levy on e-commerce supplies was withdrawn with effect from 1 August 2024, and the 6% levy on online advertising was abolished by the Finance Act 2025 with effect from 1 April 2025. The Indian payer should still confirm that the domestic FTS provisions under Section 9(1)(vii) do not apply independently.