Withholding Tax Rates: India to Romania Under DTAA

India to Romania Withholding Tax Rates Under DTAA

When an Indian entity pays a Romanian resident, tax deducted at source (TDS) is required under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961). The India-Romania DTAA, signed 8 March 2013 and in force from 16 December 2013 (effective in India from 1 April 2014), caps that withholding well below the domestic rate. Under section 159(4) of the Income-tax Act, 2025 (section 90(2) of the 1961 Act), the payer applies whichever of the treaty or domestic rate is more beneficial — and for every category on this treaty, that is the treaty rate. There is no protocol and no most-favoured-nation clause modifying any of these rates.

Dividend Withholding Rate

Article 10(2) caps Indian withholding on dividends paid to a Romanian beneficial owner at 10% of the gross amount: "the tax so charged shall not exceed 10 per cent of the gross amount of the dividends." This is a single flat rate with no shareholding-based tier of any kind — unlike treaties that give a lower rate above a minimum stake, a Romanian parent holding 1% or 100% of an Indian company faces the same 10% cap. If the holding is effectively connected with a PE or fixed base the Romanian recipient has in India, Article 10(4) routes the income instead to Article 7 (business profits) or Article 14 (independent personal services), taxed net of expenses. The Indian payer must still confirm beneficial ownership before applying the reduced rate; a nominee or conduit shareholder does not qualify.

Interest Withholding Rate

Article 11(2) caps general interest at the same 10%, with no separate tier for banks or financial institutions.

Article 11(3) goes further and fully exempts interest that is "derived and beneficially owned by" a recipient-side list of named bodies:

This exemption turns on who receives the interest, not who pays it, and it is a list of named bodies that only the two competent authorities can extend, under Article 11(3)(c) — IFCI, IDBI, and SIDBI, exempt under some other Indian treaties, do not appear in it, and there is no blanket bank exemption and no guaranteed-loan carve-out. On an India-source payment the operative names are the Romanian ones; the Indian institutions in Article 11(3)(b)(ii) matter for interest arising in Romania. Article 11(4) defines interest broadly, including premiums and prizes on debt-claims, but excludes late-payment penalty charges. Interest directly connected with the operation of ships or aircraft in international traffic is instead treated as shipping profits under Article 8(4), taken outside Article 11 altogether. Where interest is effectively connected with a PE, Article 11(5) routes it to Article 7 at the standard foreign-company rate.

Royalty and FTS Withholding Rate

Unlike treaties with a separate technical-fees article, Romania's royalties and fees for technical services sit together in one combined Article 12, "Royalties and Fees for Technical Services," both capped at 10% under Article 12(2).

The royalty definition in Article 12(3)(a) covers "any copyright of artistic, scientific or literary work including computer software," patents, trademarks, designs, secret processes, and the use of industrial, commercial, or scientific equipment — computer software is named expressly, and equipment rental has no carve-out. The FTS definition in Article 12(3)(b) covers "payments of any kind … as consideration for managerial, technical or consultancy services, including the provision of services of technical or other personnel." There is no make-available test: managerial services and personnel secondment both fall inside FTS, and the only carve-outs are payments already covered by Article 14 (independent personal services) or Article 15 (employment income). This is a broader FTS scope than treaties requiring the service to "make available" technical knowledge or skill to the recipient.

Article 12(5)(b) also deems a royalty or FTS payment to arise in the State where the right is used or the services performed, where the payer is resident in neither State and no PE bears the cost — a source rule that matters for triangular payment structures. Where the royalty or FTS is effectively connected with a PE, Article 12(4) routes it to Article 7 at the standard foreign-company rate.

Capital Gains Treatment

Article 13 does not set a withholding rate; it assigns which State may tax the gain.

Immovable property: taxable where situated (Article 13(1)). PE assets: movable property of a PE, including alienation of the PE itself, is taxable in the PE's State (Article 13(2)). Ships/aircraft: taxable only in the State of the place of effective management, not the alienator's residence (Article 13(3)). Shares: Article 13(4) gives India an unconditional right to tax "gains from the alienation of shares in a company which is a resident of a Contracting State" — no land-rich test, no minimum shareholding, no buyer-residence condition, and the MLI does not add one, since Romania reserved out of MLI Article 9 for all its treaties. Residual property is taxable only in the alienator's residence State (Article 13(5)). Because Article 13(4) leaves the gain taxable in India, an Indian buyer paying a Romanian seller for Indian shares must still withhold on the sum chargeable under section 393(2), or obtain a certificate first.

How to Apply Reduced Rates

Tax Residency Certificate

The Romanian resident must obtain a Tax Residency Certificate — the bilingual "Certificat de rezidenţă fiscală" — issued by the competent territorial tax authority within Romania's National Agency for Fiscal Administration (ANAF), under Order of the Minister of Public Finance No. 583/2016. The treaty's named competent authority, the Ministry of Public Finance, sets the framework; the local ANAF office issues and signs the certificate itself, and it must be valid for the year the income is received.

Form 41 (formerly Form 10F)

The non-resident must electronically file Form 41 (formerly Form 10F) on the Indian income-tax portal, stating status, nationality, tax identification number, period of residence, and PE status. Treaty benefit at source is available only once this declaration is filed alongside the TRC; PAN is not mandatory for this filing.

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

The Indian payer must file Form 145 before remitting. A Chartered Accountant's certificate in Form 146 is required only for Part C of Form 145: a taxable remittance above Rs 5 lakh made without a section 395 certificate.

Lower-Deduction Certificate

Where the applicable rate is uncertain, the recipient can apply to the Assessing Officer under section 395(1) of the Income-tax Act, 2025 (section 197 of the 1961 Act) for a certificate specifying the exact withholding rate, giving both parties certainty before the payment is made.

Domestic Rates vs Treaty Rates Comparison

Domestic rates under section 207 are further increased by surcharge and health-and-education cess; the treaty's 10% is an all-inclusive final rate, so the effective saving typically exceeds the headline 50%, and rises to 100% for the named interest exemptions under Article 11(3).

Worked Examples

Example 1 — Dividend: an Indian subsidiary pays its Romanian parent a Rs 80,00,000 dividend, no PE involved. At the Article 10(2) rate, TDS is Rs 8,00,000 (10%), against Rs 16,00,000 at the domestic 20% rate — a Rs 8,00,000 saving, provided the TRC and Form 41 are on file before payment.

Example 2 — General interest: an Indian company pays Rs 30,00,000 of interest on a commercial loan to an ordinary Romanian company (not a listed institution). Article 11(2)'s 10% cap applies, so TDS is Rs 3,00,000, against Rs 6,00,000 at the 20% domestic rate.

Example 3 — Exempt interest: the same Indian company instead pays interest on a bond held by the National Bank of Romania. Because the National Bank of Romania is named in Article 11(3)(b)(i), the interest is fully exempt from Indian withholding — not merely reduced to 10%.

Example 4 — Combined royalty and FTS invoice: a Romanian engineering firm invoices an Indian client Rs 25,00,000 for a technology licence and Rs 15,00,000 for related technical support, with no make-available element required. Both amounts fall under Article 12(2)'s 10% cap: TDS is Rs 2,50,000 and Rs 1,50,000 respectively (Rs 4,00,000 total), against Rs 8,00,000 combined at the 20% domestic rate.

Common Mistakes and Compliance Tips

Assuming a dividend shareholding tier

Article 10(2) has no participation-based tier; the 10% cap applies at any shareholding level.

Applying the wrong interest exemption list

Article 11(3)'s named institutions are specific to this treaty. IFCI, IDBI, and SIDBI, exempt under some other Indian treaties, are not covered here, and a general bank exemption does not exist.

Missing the PE carve-out

If the Romanian recipient has an undisclosed permanent establishment in India, the 10% caps do not apply and the income is instead taxed net as business profits at the 35% foreign-company rate. Confirm PE status through the Form 41 declaration before applying the treaty rate.

Skipping Forms 145/146

Non-filing of Form 145, or of Form 146 where Part C applies (a remittance above Rs 5 lakh without a section 395 certificate), can delay the remittance and expose the payer to penalties, regardless of whether the correct treaty rate was applied.

Ignoring GAAR and beneficial ownership

India's domestic GAAR and the treaty's own Article 27 Limitation of Benefits, plus the MLI Principal Purpose Test from 1 April 2024 (India) / 1 January 2024 (Romania), can all deny the 10% rate to conduit or non-genuine arrangements, even where the TRC and Form 41 paperwork is otherwise in order.

For the full treaty analysis, including PE thresholds, capital gains, and the residence tie-breaker, see our India-Romania DTAA guide. Beacon Filing's DTAA master guide covers the underlying concepts across all of India's treaties.

Frequently Asked Questions

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

Article 10(2) of the India-Romania DTAA caps dividend withholding at a flat 10% of the gross amount, with no shareholding-based tier, against India's 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 interest paid to Romanian banks exempt from Indian withholding tax?

No. Article 11(2) caps general interest, including interest to Romanian banks, at 10%. Full exemption under Article 11(3) is limited to the other State's government, its administrative-territorial units, political sub-divisions and local authorities, and a named list: the National Bank of Romania and the Export-Import Bank of Romania, and, on the Indian side, the Reserve Bank of India, the Export-Import Bank of India and the National Housing Bank.

What is the FTS withholding rate under the India-Romania DTAA?

Fees for technical services are taxed under the same combined Article 12 as royalties, capped at 10% under Article 12(2). There is no make-available test, so managerial and consultancy services and personnel secondment are all included, unlike treaties with a narrower FTS definition.

Does a permanent establishment change the withholding rate?

Yes. If the Romanian recipient's income is effectively connected with a PE or fixed base in India, the 10% treaty caps on dividends, interest, royalties, and FTS no longer apply. The income is instead taxed net of expenses as business profits under Article 7, generally at the 35% foreign-company rate.

What documents are needed to apply the treaty rate at source?

The Romanian recipient needs a Tax Residency Certificate issued by the competent Romanian tax authority under Order 583/2016, plus an electronically filed Form 41 (formerly Form 10F). The Indian payer must also file Form 145 before remitting, with Form 146 added only for Part C of Form 145: a remittance above Rs 5 lakh made without a section 395 certificate.

Can the Indian tax authority deny the 10% treaty rate?

Yes. India's domestic GAAR, the treaty's own Article 27 Limitation of Benefits, and, from 1 April 2024 for India-source payments, the MLI Principal Purpose Test can all deny treaty benefits where an arrangement's main purpose was to obtain them, even if the beneficial-owner and TRC paperwork is in order.