Avoidance of double taxation agreement applies to dividends and interest during depositary bank fiduciary ownership and on subsequent non resident transfers.

When shares are held in fiduciary ownership by an Overseas Depositary Bank under the Depositary Receipt mechanism, the Avoidance of Double Taxation Agreement between India and the bank's country of residence governs taxation of dividends on underlying shares and interest on Foreign Currency Convertible Bonds. If redeemed underlying shares pass from fiduciary ownership to a non resident investor who retains them prior to sale to resident purchasers, the DTAA with the non resident investor's country governs taxation of dividends, interest and any capital gains on transfer of those shares.

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