Article 5 India-Us Double Taxation Avoidance Agreement

(ii) where applicable, the excess of any interest deductible in the United States for the calculation of the profits of the enterprise, taxable in the United States, either attributable to a permanent establishment in the United States or taxable in the United States pursuant to Article 6 (Income From Immobile Vermögen (Real Property)), Article 12 (including royalties and service charges) as costs of enumerating the services or Article 13 (profits) of this Agreement on interest paid by or by the establishment stable or through trade or activity in the United States. 4. The provisions of paragraphs 1 and 2 above shall not apply where the beneficial owner of the dividends, established in a Contracting State, operates in the other Contracting State in which the company which paid the dividends, through a permanent establishment or provides in that other State independent personal services from a fixed place of business in that State; and the dividends are due to that permanent establishment or to the fixed base. In this case, the provisions of Article 7 (commercial profits) and Article 15 (independent personal services) shall apply. one. and derived from and advantageously owned by the Government of the other Contracting State, a political subdivision or local authority, the Reserve Bank of India or the Reserve Bank of India. the Federal Reserve Bank of the United States and other institutions of a Contracting State which may agree with the competent authorities in accordance with Article 27 (mutual agreement procedure); 6. avoid double taxation of income by dividing taxation duties between the country of origin in which the income is received and the country of residence of the beneficiary; promote cooperation between or between States in the fulfilment of their obligations and ensure the stability of the tax burden. If India`s income can be taxed in accordance with Article 12 of the Treaty, the US service provider may, in accordance with Article 25(3)(a), `collect` the income from the services as foreign income at source for foreign tax credit purposes. The amount that can be derived from sources as foreign income is limited to an amount that is just enough to allow a foreign tax credit for the 15% of Indian taxes paid. This will avoid double taxation.

A separate Form 1116, Foreign Tax Credit (Individual, Estate, or Trust) or Form 1118, Foreign Tax Credit Corporations, must be completed by the U.S. service provider, and the box “Certain income that is required by contract” should be entered. On Form 8833, Treaty-Based Return Position Disclosure, pursuant to Section 6114 or 7701(b), no separate disclosure of the contract is required. Treas. Reg. §301.6114-1 (c) (1) (v). 2. Where an enterprise of a State Party carries on business in the other State Party through a permanent establishment situated therein, subject to paragraph 3 of this article, the profits which might be expected of it in the case of a separate and independent enterprise which carries on the same or similar activities under the same or similar conditions and which are wholly carried out by arms shall be attributed to that permanent establishment. Duration with the undertaking of which it is the permanent establishment and other undertakings which control, control or are subject to the same joint control as that undertaking. In all cases where it is not possible to determine the correct amount of profits attributable to a permanent establishment or where its determination poses exceptional difficulties, the profits attributable to the establishment may be estimated on a reasonable basis.

. . .