Withholding Tax Rates: India to Kazakhstan Under DTAA

India to Kazakhstan Withholding Tax Rates Under the DTAA

When an Indian entity pays a Kazakh resident — dividends, interest, royalties, or fees for technical services (FTS) — 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-Kazakhstan DTAA, signed 9 December 1996 and in force since 2 October 1997, caps all four categories at a flat 10% — a single rate with no shareholding tiers, no bank exemptions beyond the Government and Central Bank, and no separate lower tier for any category. Under section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961), the taxpayer applies whichever of the domestic rate or the treaty rate is more beneficial. This page sets out each category's rate, the article it comes from, the PE carve-out, and the compliance steps.

Dividend Withholding Rate

Under Article 10 of the India-Kazakhstan DTAA, dividends paid by an Indian company to a beneficial owner resident in Kazakhstan are capped at 10% of the gross amount, and vice versa.

There is no shareholding-based reduction of any kind — the 10% cap is flat whether the recipient holds 1% or 100% of the paying company. Article 10(4) diverts the dividend to Article 7 (business profits) where the shareholding is effectively connected with a PE the beneficial owner has in the paying company's country.

Article 10(6) additionally permits — but does not itself impose — a second-tier charge: once a company's PE profits have been taxed under Article 7, the PE's country may tax the remaining after-tax amount at a rate no higher than the Article 10(2) cap of 10%. Whether either country currently levies such a charge domestically is outside the scope of this page.

Interest Withholding Rate

Article 11 governs interest. Interest arising in India and paid to a Kazakh resident beneficial owner is capped at 10%.

Unlike India's treaties with several European countries, the exemption in Article 11(3) does not name a list of development or export-credit banks — beyond the Central Bank, limb (ii) reaches only institutions "mutually agreed upon between the two Contracting States," and no such agreed list appears in the published treaty text. Do not assume any particular Kazakh or Indian development bank qualifies without independent confirmation. Penalty charges for late payment are expressly excluded from "interest" under Article 11(4), and interest on funds connected with operating ships or aircraft in international traffic is treated as Article 8 shipping profit rather than Article 11 interest — except for interest on fixed deposits with a bank, which remains within Article 11.

Royalty and FTS Withholding Rate

Article 12 combines royalties and fees for technical services in a single article — unlike treaties that separate them — and caps both at 10% of the gross amount.

For royalties, the 10% treaty rate is half the domestic rate of 20% under section 207(2) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961). The definition at Article 12(3)(a) names software expressly alongside copyright, patents, trademarks, designs, and secret processes.

For FTS, Article 12(3)(b) reaches "any managerial, technical or consultancy" payment, including the provision of personnel, with no "make available" condition — a broader scope than treaties modelled on the India-USA or India-UK approach. The domestic comparison rate is 20% under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961). One drafting point worth flagging: Article 12(4)'s PE carve-out text refers only to "the beneficial owner of the royalties" and does not separately name fees for technical services, unlike the parallel special-relationship paragraph 12(6), which covers both. This page does not draw a conclusion on how that gap plays out for PE-connected FTS in practice — treat it as a point to raise with an advisor on a PE-exposed FTS arrangement rather than a settled rule.

Capital Gains Treatment

Article 13 is a taxing-rights allocation, not a rate cap. Gains on immovable property are taxable where the property sits (13(1)). Gains on a PE's business movables, including gains from alienating the PE itself, are taxable in the PE's country (13(2)). Gains on ships and aircraft in international traffic are taxable only in the alienator's residence country (13(3)).

Paragraph 13(4) has been replaced by MLI Article 9(4): gains on shares or comparable interests — including partnership and trust interests — may be taxed in the other country if, at any time in the 365 days before the sale, those interests derived more than 50% of their value from immovable property situated there. The original "principally" test, with no percentage or look-back period, no longer applies.

Article 13(5) separately gives the company's residence country an unconditional right to tax gains on shares outside 13(4) — no minimum holding, no land-rich test. India can therefore tax a Kazakh resident's gain on Indian-company shares under its own domestic capital gains rules (section 196, 197, or 198 of the Income-tax Act, 2025, according to the holding period and listing status, succeeding sections 111A, 112, and 112A of the Income-tax Act, 1961) regardless of what the company owns. Residual gains not covered elsewhere fall to Article 13(6), taxable only in the seller's residence country.

How to Claim the Reduced Rate

Tax Residency Certificate (TRC)

The Kazakh recipient must obtain a Tax Residency Certificate issued by the Kazakhstan tax authorities under the Ministry of Finance — the competent authority named in Article 3(1)(g) of the treaty.

Form 41 (formerly Form 10F)

The non-resident must electronically file Form 41, providing status, place of incorporation or nationality, tax identification number, and the period of residence the certificate covers.

Forms 145 and 146 (formerly Forms 15CA and 15CB)

The Indian payer files Form 145 before remitting. A chartered accountant's certificate on Form 146, confirming the applicable rate and treaty eligibility, is needed only for Part C of Form 145 — a taxable remittance above INR 5 lakh made without a section 395 certificate.

Lower or Nil Deduction Certificate

Where there is uncertainty about the correct rate, the Kazakh recipient can 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 specifying a lower or nil rate. The Indian payer has a separate route under section 395(2) (sections 195(2) and 195(3) of the Income-tax Act, 1961) to have the deductible portion of the remittance determined.

Worked Examples

Dividend example. An Indian subsidiary declares a dividend of INR 50,00,000 to its Kazakh parent, which holds a valid TRC and Form 41. Withholding at the treaty rate is 10% — INR 5,00,000 — instead of INR 10,00,000 at the domestic 20% rate under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025, a saving of INR 5,00,000.

Combined royalty and FTS example. A Kazakh engineering firm invoices an Indian client USD 100,000, split USD 60,000 for a technical drawing licence (a royalty) and USD 40,000 for consultancy (FTS), with no PE in India. Both fall under Article 12(2): the Indian payer withholds USD 6,000 on the royalty and USD 4,000 on the FTS, a combined USD 10,000, against USD 20,000 that the domestic 20% rate would otherwise require — a straightforward 50% reduction on both limbs.

Interest exemption example. An Indian public-sector borrower pays interest on a loan from the National Bank of Kazakhstan. Because the recipient is the Central Bank of the other Contracting State, Article 11(3)(ii) exempts the interest entirely — 0% withholding rather than the general 10% treaty rate or the 20% domestic rate.

Domestic Rates vs Treaty Rates Comparison

The domestic rates under section 207(1) and section 207(2) of the Income-tax Act, 2025 attract surcharge and health-and-education cess on top; the treaty's 10% is the final, all-inclusive rate with no addition. Surcharge and cess never apply on top of a DTAA rate.

Common Mistakes and Compliance Tips

Mistake 1: Citing a most-favoured-nation rate

The 1996 Protocol's MFN clause covering dividends, interest, royalties, and FTS was deleted by the 2017 amending Protocol, effective in India from 1 April 2018. No lower rate can be imported from a third-country treaty through this DTAA today.

Mistake 2: Assuming a broad list of exempt interest recipients

Article 11(3) exempts only the Government, political subdivisions, local authorities, the Central Bank, and specifically agreed institutions — there is no published list of additional development banks the way some European treaties carry.

Mistake 3: Missing the services PE

Personnel on the ground for more than 90 days on the same or a connected project within any 12-month period create a PE under Article 5(3)(c), inserted only in 2018. Payments to that PE's activity move from a flat withholding rate to net-basis taxation under Article 7.

Mistake 4: Conflating the three PE clocks

Construction is 12 months, natural-resource exploration installations are 6 months, and services are 90 days — three separate thresholds in the same article.

Mistake 5: Treating Article 13(4)'s old wording as current

The original "principally immovable property" test with no percentage or look-back period has been replaced by the MLI's 50%/365-day test. Citing the old wording as if it were the current rule misstates the law.

For the full treaty picture, including PE rules, residence tie-breakers, and anti-abuse provisions, see our India-Kazakhstan DTAA guide.

Frequently Asked Questions

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

Article 10(2) caps dividend withholding at a flat 10% of the gross amount for any beneficial owner resident in Kazakhstan, with no shareholding tiers, against a 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).

Is there a reduced rate for interest paid to Kazakh banks?

Only the Central Bank of Kazakhstan and institutions specifically agreed between the two governments qualify for the Article 11(3) exemption. Ordinary commercial banks fall under the general 10% rate in Article 11(2), not the exemption — there is no published list of additional development banks the way some European treaties carry.

What is the FTS rate under the India-Kazakhstan DTAA?

Fees for technical services are capped at 10% under Article 12(2), the same rate as royalties in this combined article, with no make-available requirement, so managerial, technical, and consultancy payments — including provision of personnel — all fall within scope unless covered by the independent-services or employment articles. This is a broader FTS scope than treaties requiring technology to be made available.

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

No. The original 1996 Protocol's MFN clause covering dividends, interest, royalties, and FTS was deleted by Article XIV of the 2017 amending Protocol, effective in India from 1 April 2018. Any commentary describing an MFN benefit for this treaty predates that deletion and no longer reflects current law.

What documents does a Kazakh recipient need to claim the 10% rate?

A Tax Residency Certificate from the Kazakhstan tax authorities under the Ministry of Finance, an electronically filed Form 41, and, for the Indian payer, Form 145 for the remittance, with a chartered accountant's certificate on Form 146 needed only where Part C of Form 145 applies: a taxable remittance above INR 5 lakh made without a section 395 certificate.

What happens if TDS is deducted at the 20% domestic rate instead of the 10% treaty rate?

The Kazakh recipient can claim a refund of the excess by filing an Indian income tax return, or the payer can seek rectification. It is preferable to apply the correct treaty rate at the time of payment, supported by a valid TRC and Form 41.