Dividend taxation: source state may tax dividends while residence state also taxes, subject to treaty cap and permanent establishment exceptions.

Dividends paid by a company resident in one Contracting State to a beneficially entitled resident of the other State may be taxed in the recipient's State; such dividends may also be taxed in the State of the paying company subject to a treaty cap. "Dividends" include income from shares and similarly treated income. Residence/source treatment is displaced where the beneficial owner's holding is effectively connected with a permanent establishment or fixed base in the source State, in which case business profits or independent personal services rules apply. Nonresident recipients are exempt in the recipient State unless effectively connected; a specified exception applies to companies resident in both Australia and India.

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