Withholding Tax Rates: India to Czech Republic Under DTAA

Key takeaways:

• Dividends, interest, royalties, and FTS: all a flat 10% under Articles 10(2), 11(2), and 12(2)
• Interest beneficially owned by, or on a loan extended or endorsed by, RBI/IFCI/IDBI/EXIM Bank/NHB/SIDBI/ICICI (India-side) or CNB/CEB/EGIC/Konsolidation Bank (Czech-side) is exempt under Article 11(3)
• Rupee-denominated interest to a non-resident sits outside India's 20% foreign-currency table, at “rates in force” (30%/35%) domestically — the treaty's 10% cap applies regardless of currency
• No MFN clause and no LOB article exist for this treaty
• Income effectively connected with an Indian permanent establishment is taxed under Article 7 or 14, not at the 10% withholding rate

India to Czech Republic Withholding Tax Rates Under DTAA

When an Indian entity pays a Czech resident — whether dividends, interest, royalties, or fees for technical services — tax must be withheld under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961). The India-Czech Republic DTAA, signed 1 October 1998 and in force from 27 September 1999, caps these rates at a flat 10% across every income head — a genuinely simple rate card compared with treaties that split dividends or interest into multiple tiers.

Under section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961), the taxpayer applies whichever rate is more beneficial — domestic or treaty. This page gives an article-by-article breakdown of every rate, exemption, and carve-out under this treaty. For the full treaty context, see our India-Czech Republic DTAA guide.

Rate Matrix at a Glance

Dividend Withholding Rate

Article 10(2) of the India-Czech Republic DTAA caps dividends paid by an Indian company to a Czech beneficial owner at 10% of the gross amount.

Unlike many of India's other treaties, there is no shareholding-based tier here — not 5% for a substantial holding, not 15% for a portfolio holding. A Czech parent holding 100% of an Indian subsidiary and a Czech investor holding a single share both face the same 10% withholding on any dividend, a meaningfully higher effective rate than treaties (Singapore, Mauritius in some cases) that reward large holdings with a 5% cap.

Interest Withholding Rate

Article 11 governs interest. The general rate is 10% under Article 11(2), with no separate bank or financial-institution tier — an ordinary commercial lender's interest is capped at 10%, the same as any other lender.

The Article 11(3) exemption — recipient AND endorsement limbs

Article 11(3) exempts interest “derived and beneficially owned by, or derived in connection with a loan or credit extended or endorsed by” a list of bodies keyed by country: the Government, a political sub-division, or local authority of the other State; for India, the Reserve Bank of India, the Industrial Finance Corporation of India, the Industrial Development Bank of India, the Export Import Bank of India, the National Housing Bank, the Small Industries Development Bank of India, and the Industrial Credit and Investment Corporation of India (ICICI); for the Czech Republic, the Czech National Bank (CNB), the Czech Export Bank (CEB), the Export Guarantee and Insurance Company (EGIC), and the Konsolidation Bank (KB).

The exemption operates in the State where the interest arises: Indian-source interest is exempt when owned by, or extended/endorsed by, the Czech Government or CNB/CEB/EGIC/KB, and vice versa. Because the clause reaches loans extended or endorsed by these bodies, a commercial bank's interest on an EGIC-endorsed export credit can also qualify — broader than a recipient-only test, and payers often miss it. Article 11(4) excludes late-payment penalties from “interest.”

Why this matters for rupee lending

India's domestic 20% rate on non-resident interest under section 207(1) (Table, Sl. No. 3) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961) applies only to foreign-currency interest. Rupee-denominated interest paid to a non-resident instead falls to the residual “rates in force” category — 30% for individuals and 35% for foreign companies from FY 2024-25 onward, before surcharge and cess. Article 11(2)'s 10% cap applies regardless of the loan's currency, which makes this treaty unusually valuable for Czech lenders financing Indian borrowers in rupees — the gap between the treaty rate and the domestic rate is far wider here than for foreign-currency debt.

Interest on funds directly connected with the operation of ships or aircraft in international traffic is treated as Article 8 shipping/aircraft profit rather than Article 11 interest (Article 8(3)), so it follows the operator's residence-based taxation instead of the 10% withholding cap.

Royalty and FTS Withholding Rate

Article 12, titled “Royalties and Fees for Technical Services,” combines both categories into a single Article with a single 10% cap under Article 12(2) — there is no separate, higher rate for FTS.

The royalty definition (Article 12(3)(a)) is the wide, Indian-model list: copyright of literary, artistic, or scientific work (including films and broadcasting tapes), patents, trade marks, designs, secret formulas or processes, and any industrial, commercial, or scientific equipment or information concerning industrial, commercial, or scientific experience. There is no equipment carve-out — equipment leasing and hire payments to a Czech resident fall within the royalty definition and the same 10% cap.

The FTS definition (Article 12(3)(b)) reads: “payments of any kind received as a consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention.” There is no “make available” requirement — the narrower drafting used in India's treaties with Singapore, the US, the UK, and the Netherlands does not appear here. Managerial services and the secondment of personnel both fall squarely within FTS; only independent personal services (Article 14) and dependent personal services (Article 15) are excluded. This broad scope means payers should default to treating cross-border technical, managerial, or consultancy fees paid to a Czech resident as FTS unless a specific carve-out applies.

Capital Gains Treatment

Capital gains provisions under Article 13 determine taxing rights rather than setting a withholding percentage, but they matter for structuring any exit or disposal involving a Czech resident.

Shares of an Indian company: Article 13(5) gives India an unconditional right to tax a Czech resident's gains on Indian-company shares (other than land-rich shares covered separately by 13(4)) — there is no percentage shareholding threshold and no grandfathering date. The Article 13(4) land-rich test itself uses the word “principally” with no stated percentage and no lookback period. Such gains are taxed under India's ordinary domestic capital gains provisions; Article 24 credit relief in the Czech Republic is the mechanism for avoiding double taxation, not a source-side exemption.

Ships and aircraft: gains follow the alienating enterprise's residence State under Article 13(3) — not the place of effective management, and not the situs of the asset.

How to Apply the Reduced Rate

Tax Residency Certificate

The Czech resident must hold a Tax Residency Certificate (TRC), per section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961). It is issued by the locally competent tax administrator (finanční úřad) of the Czech Financial Administration, confirmed on the Ministry of Finance's Form No. 25 5232 or a foreign administrator's form, filed in Czech, with a fee of CZK 100 per certificate.

Form 41 and remittance forms

The recipient must electronically file Form 41 (formerly Form 10F) — treaty benefit at source applies only once this is on file. The Indian payer files Forms 145 and 146 (formerly Forms 15CA and 15CB) for the remittance; the Chartered Accountant's Form 146 certificate is needed only for Part C of Form 145 — a taxable remittance above INR 5 lakh with no Assessing Officer's certificate in hand.

Lower deduction certificate

If the applicable rate is uncertain, the recipient may apply under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961) for a certificate from the Assessing Officer confirming the correct, lower rate before payment.

Worked Examples

Example 1: Royalty payment

An Indian software company pays a Czech licensor ₹25,00,000 for use of a patented process. Domestic rate under section 207(2) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961) is 20% — ₹5,00,000. Article 12(2) caps the treaty rate at 10% — ₹2,50,000. Saving: ₹2,50,000, provided the TRC and Form 41 are on file.

Example 2: Interest exempt via endorsement

An Indian importer's term facility carries interest of ₹90,00,000, and the underlying loan is extended and endorsed by the Czech Export Bank (CEB) as export-credit guarantor. Because the loan is “extended or endorsed by” CEB — one of the Article 11(3)(b)(ii) named Czech institutions — the interest is fully exempt: ₹0 withholding, against a general treaty rate of 10% (₹9,00,000) or a 20% domestic foreign-currency rate (₹18,00,000). Missing this endorsement limb and withholding at the general 10% rate instead of applying the exemption over-withholds by ₹9,00,000.

Domestic Rates vs Treaty Rates

The DTAA rate is the final rate — no surcharge or cess is added on top, unlike the domestic rates. The gap is largest for rupee-denominated interest, since domestic law taxes it outside the 20% foreign-currency table entirely.

Common Mistakes and Compliance Tips

Assuming a dividend or interest tier exists

Every rate here is a flat 10%. There is no 5%/15% dividend split and no separate bank tier on interest to apply.

Missing the Article 11(3) endorsement limb

The exemption covers loans “extended or endorsed by” the named institutions, not just interest owned by them directly. Payers routinely over-withhold on export-credit-guaranteed loans by missing this.

Applying the 20% FCY table to rupee interest

Rupee-denominated interest to a non-resident is not in India's 20% table — it is taxed domestically at “rates in force,” making the treaty's flat 10% even more valuable than it first appears.

Claiming an MFN or LOB benefit

No Protocol exists for this treaty, so there is no MFN clause and no LOB article to invoke — a claim based on either will fail. Anti-abuse review instead runs through beneficial-ownership tests, the MLI's PPT, and India's domestic GAAR.

Skipping Form 41 or the TRC

Treaty benefit at source is available only once a valid TRC and a filed Form 41 are on record before payment; without them, the payer must withhold at the higher domestic rate.

For the full treaty context, see our India-Czech Republic DTAA guide, or our DTAA master guide for how treaty claims work across India's treaty network.

Frequently Asked Questions

What is the withholding tax rate on dividends from India to the Czech Republic?

Under Article 10(2) of the India-Czech Republic DTAA, dividends are capped at a flat 10% of the gross amount, with no shareholding tiers and no reduced rate for a substantial holding. This compares with a 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), provided a valid Tax Residency Certificate and Form 41 are on file.

Is there a 0% rate for interest paid to a Czech lender?

Yes, but only under Article 11(3): interest is exempt where it is beneficially owned by, or arises from a loan extended or endorsed by, the Government or a named institution — the Czech National Bank, Czech Export Bank, Export Guarantee and Insurance Company, or Konsolidation Bank on the Czech side. An ordinary commercial lender's interest stays taxable at the general 10% rate under Article 11(2).

How is rupee-denominated interest to a Czech resident taxed?

India's domestic 20% withholding table applies only to foreign-currency interest; rupee-denominated interest to a non-resident falls to the residual "rates in force" category — 30% for individuals and 35% for foreign companies from FY 2024-25. Article 11(2) caps the treaty rate at 10% regardless of currency, making this treaty especially valuable for rupee-denominated lending into India.

What is the FTS rate under the India-Czech Republic DTAA?

Fees for technical services share Article 12 with royalties and are capped at 10% under Article 12(2), the same rate as royalties. The definition has no "make available" requirement, so managerial, technical, and consultancy services — including provision of personnel — all fall within FTS unless covered separately by Articles 14 or 15.

Does the India-Czech Republic DTAA have an MFN or LOB clause that could lower these rates further?

No. This treaty has no Protocol, and therefore no Most Favoured Nation clause and no Limitation of Benefits article. Every rate is already a flat 10% with no tiers, so there is nothing an MFN claim could reduce; anti-abuse protection instead rests on beneficial-ownership tests, the MLI's Principal Purposes Test, and India's domestic GAAR.

How are capital gains on Indian-company shares held by a Czech resident taxed?

Article 13(5) gives India an unconditional right to tax a Czech resident's gains on shares of an Indian company (other than land-rich shares under Article 13(4)), with no percentage shareholding threshold and no grandfathering date. Such gains are taxed under India's ordinary domestic capital gains rules, with credit relief available in the Czech Republic under Article 24.