Withholding Tax Rates: India to Oman Under DTAA

India to Oman Withholding Tax Rates Under the DTAA

When an Indian entity pays dividends, interest, royalties, or technical fees to an Omani resident, tax must be withheld at source under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961). The India-Oman DTAA, signed 2 April 1997 and effective from 3 June 1997, caps these rates well below India's domestic 20% withholding rate — and following a 25 June 2025 amendment (Notification S.O. 2858(E)), the royalty and technical-fee caps are now lower still.

Under section 159(4) of the Income-tax Act, 2025 (section 90(2) of the Income-tax Act, 1961), a taxpayer may apply whichever of the domestic rate or the treaty rate is more beneficial. This page sets out each category, its governing article, and the conditions attached, using the treaty's own — shifted — article numbering: dividends sit in Article 11, interest in Article 12, royalties in Article 13, and technical fees in a standalone Article 14.

Rate Matrix at a Glance

Dividend Withholding Rates — Article 11

Article 11(2) of the India-Oman DTAA sets two dividend tiers — an unusual structure among India's treaties, most of which use either a single flat rate or a round-number shareholding split.

The treaty text prints the residual rate as "12½ per cent" — write this as 12.5%, not 12% or 13%. Both tiers 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), so the DTAA rate should always be applied where a valid Tax Residency Certificate and Form 41 are on file. Where the shareholding is effectively connected with a permanent establishment (PE) or fixed base of the Omani beneficial owner in India, Article 11(4) instead routes the income to Article 7 (business profits) or Article 16 (independent personal services), taxed on a net basis at ordinary rates rather than by gross withholding.

Interest Withholding Rates — Article 12

Article 12(2) caps interest paid to an Omani beneficial owner at a flat 10% of the gross amount. Unlike several other Indian treaties, there is no separate reduced tier for banks or financial institutions as such — the 10% cap is a single, general rate.

Article 12(3) sets out two distinct exemption limbs, and payers should not conflate them or assume a named-institution list exists — no bank, agency, or fund is named in either limb. Article 12(3)(a) is self-executing: interest is exempt where it is derived and beneficially owned by the Government, a political sub-division, a local authority, or the Central Bank of the other Contracting State — described functionally, never by name. Article 12(3)(b) is different in kind: it exempts interest owed to any other Omani resident only "to the extent approved by the Government of" the source State, and only where "the transaction giving rise to the debt-claim has been approved in this regard" by that Government. This is a discretionary, transaction-by-transaction government approval mechanism, not a standing exemption for commercial banks, export-credit agencies, or private lenders as a class — payers should confirm the specific approval exists before applying 0% under this limb.

Article 12(4) defines interest to include income from debt-claims of every kind — including government securities, bonds, debentures, and attached premiums or prizes — but expressly carves out late-payment penalty charges, which are not treated as interest for withholding purposes. There is no domestic-law assimilation clause layered on top of this definition.

Royalty Withholding Rates — Article 13 (Cut to 10% in 2025)

Article 13(2) caps royalty withholding at 10% of the gross amount, provided the recipient is the beneficial owner and is a resident of Oman.

This 10% cap is a substantial change from the treaty's original 15% rate. Notification S.O. 2858(E) [No. 69/2025/F.No. 501/6/1991-FTD-II], dated 25 June 2025, substituted the words "15 per cent" with "ten per cent 10%" in Article 13(2), effective the same date. Payers relying on older summaries or pre-2025 templates showing a 15% royalty rate for Oman are using superseded law — any royalty accrued or paid on or after 25 June 2025 attracts the 10% treaty cap, not 15%. The definition of "royalties" in Article 13(3) covers the standard categories: copyright of literary, artistic or scientific work (including films and broadcast tapes), patents, trademarks, designs, secret processes, and industrial, commercial or scientific equipment or experience.

Technical Fees Withholding Rates — Article 14 (Standalone, Cut to 10% in 2025)

Fees for technical services are governed by their own standalone Article 14, "Technical Fees" — not folded into the royalties article as in some other Indian treaties. Article 14(2) caps the rate at 10% of the gross amount, also cut from 15% by the same 25 June 2025 notification.

Article 14(3) defines technical fees 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." Two features distinguish this from the FTS articles in many other Indian treaties. First, there is no make-available requirement — the 10% rate applies to bare technical, managerial, or consultancy services whether or not any technology or know-how transfers to the Indian payer. Second, managerial and consultancy services are expressly within scope, not carved out. The only exclusion is a payment to an employee of the payer, which is taxed instead as salary income under Article 17. Do not import a make-available limb, an ancillary-to-royalty limb, or a development-and-transfer-of-a-technical-plan exclusion from a US-, UK-, or Singapore-style treaty — none of them exists in this article.

Permanent Establishment Carve-Out

For every one of dividends, interest, royalties, and technical fees, the treaty routes income away from the flat withholding rate and into net-basis taxation under Article 7 (business profits) or Article 16 (independent personal services) wherever the income is effectively connected with a permanent establishment or fixed base of the beneficial owner in India. This is set out separately for each income type: Article 11(4) for dividends, Article 12(5) for interest, Article 13(4) for royalties, and Article 14(4) for technical fees. Determining whether a PE exists is therefore a threshold question before applying any of the flat rates in this article.

How to Apply the Reduced Rates

Tax Residency Certificate

The Omani resident must obtain a Tax Residency Certificate from the Oman Tax Authority — the Omani competent authority is the Chairman of the Tax Authority under Article 3(1)(e), as substituted by the 2025 amendment (previously "the Ministry of National Economy and Supervisor of Ministry of Finance").

Form 41 (formerly Form 10F)

The non-resident must electronically file Form 41 (formerly Form 10F), confirming status, tax identification, and the period of residence. Treaty relief at source is available only once this declaration is on file.

Form 145 (formerly Form 15CA)

The Indian payer files Form 145 (remittance reporting) before making the payment, applying the treaty rate rather than the domestic rate once the TRC and Form 41 are in hand. Form 146 (formerly Form 15CB), the accountant’s certificate, is not required for every outward remittance — only for a Part C remittance, meaning a taxable remittance above INR 5,00,000 made without a certificate under section 395.

Lower Withholding Certificate

Where there is uncertainty about the applicable rate, the non-resident 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 specifying the correct rate in advance.

Worked Examples

Example 1: Dividend to a 15%-shareholding Omani parent

An Omani holding company owns 15% of the shares of its Indian subsidiary and receives a dividend of INR 1,00,00,000. Because the shareholding is at least 10%, Article 11(2)(a) applies: withholding is capped at 10%, i.e. INR 10,00,000, rather than the residual 12.5% rate or the 20% domestic rate — a saving of INR 2,50,000 against the residual treaty tier and INR 10,00,000 against the domestic rate.

Example 2: Royalty paid on or after 25 June 2025

An Indian company pays an Omani licensor a royalty of INR 20,00,000 for the use of a patented process, with payment made in August 2025. Because the payment date falls after the 25 June 2025 effective date of Notification S.O. 2858(E), the applicable treaty rate is 10% (Article 13(2)), giving withholding of INR 2,00,000, not the pre-amendment 15% (INR 3,00,000) and not the 20% domestic rate under section 207(2) (Table, Sl. No. 1) of the Income-tax Act, 2025 (INR 4,00,000).

Domestic Rates vs Treaty Rates Comparison

Domestic rates under section 207(1) and section 207(2) of the Income-tax Act, 2025 apply on top of applicable surcharge and health-and-education cess; the DTAA rates above are final, all-inclusive rates with no surcharge or cess added.

Common Mistakes and Compliance Tips

Mistake 1: Applying the pre-2025 15% royalty or technical-fee rate

For any royalty or technical-fee payment accruing or paid on or after 25 June 2025, the correct treaty cap is 10%, not 15%. Review any standing withholding instruction or contract clause that still cites 15%.

Mistake 2: Treating Article 12(3)(b) as an automatic bank exemption

Article 12(3)(b) requires a specific government approval of both the exemption and the underlying transaction. It is not a blanket carve-out for commercial lenders, and applying 0% without confirming the approval risks a shortfall assessment plus interest under section 398 of the Income-tax Act, 2025 (section 201 of the Income-tax Act, 1961).

Mistake 3: Using OECD-standard article numbers

Citing "Article 10" for dividends or "Article 12" for royalties will point to the wrong provision in this treaty — Article 10 is Associated Enterprises here, and Article 12 is Interest.

Mistake 4: Missing the effectively-connected-with-PE carve-out

If the Omani recipient has a PE or fixed base in India connected with the income, none of the flat rates above apply — the income is taxed as business profits under Article 7 (or Article 16 for independent personal services) on a net basis.

Mistake 5: Skipping Form 41 or the TRC

Without a valid TRC and a filed Form 41, the payer must withhold at the 20% domestic rate under section 207 of the Income-tax Act, 2025, leaving the Omani recipient to claim a refund by filing an Indian tax return.

For the full treaty background, see our India-Oman DTAA guide.

Frequently Asked Questions

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

Article 11(2) of the treaty sets a 10% rate 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 well below India's 20% domestic rate under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025.

What is the current royalty withholding rate between India and Oman?

The royalty withholding rate is 10%, under Article 13(2) of the treaty. This was cut from 15% by Notification S.O. 2858(E), with effect from 25 June 2025. Payments made or accrued before that date remain subject to the earlier 15% rate, so check the payment date before applying either figure.

Is interest paid to the Central Bank of Oman exempt from Indian withholding?

Yes. Article 12(3)(a) exempts interest from Indian tax entirely where it is derived and beneficially owned by the Government of Oman, a political sub-division, a local authority, or the Central Bank of Oman. A separate, discretionary exemption under Article 12(3)(b) can also apply to other Omani residents, but only to the extent a specific transaction has been approved by the Government of India.

Does a make-available test apply to technical fees under this treaty?

No. Article 14, which covers technical fees as a standalone provision separate from royalties, has no make-available requirement. The 10% rate applies to technical, managerial, or consultancy services whether or not any technology or know-how is transferred to the Indian payer, and whether or not the services leave any lasting capability behind.

What documents are required to apply the reduced DTAA rate?

A Tax Residency Certificate issued by the Oman Tax Authority, and an electronically filed Form 41 (formerly Form 10F) confirming status, tax identification, and residence period. The Indian payer must also file Form 145 (formerly Form 15CA) before remitting the payment — Form 146 (formerly Form 15CB) only for a Part C remittance, taxable and above INR 5,00,000 without a section 395 certificate — and should keep a self-declaration of beneficial ownership on file.

Can the Indian tax authority deny treaty benefits even if the paperwork is complete?

Yes. Article 27B, a bilateral Principal Purpose Test inserted in 2025, denies a treaty benefit where obtaining it was one of the principal purposes of an arrangement, unless granting it accords with the object and purpose of the treaty. India's domestic GAAR applies in parallel.