Interest taxation under DTAA: source state may tax with capped withholding; exemptions for government and central bank. Interest paid to a resident may be taxed in the recipient's State, but the source State may also tax it subject to limits if the recipient is the beneficial owner. Interest to governments and central banks is exempt in the source State. The Article defines interest as income from debt-claims and excludes penalty charges. Where the beneficial owner has a permanent establishment or fixed base in the source State and the debt is effectively connected with it, business or professional income rules apply. Special-relationship adjustments restrict treaty application to arm's-length amounts.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Interest taxation under DTAA: source state may tax with capped withholding; exemptions for government and central bank.
Interest paid to a resident may be taxed in the recipient's State, but the source State may also tax it subject to limits if the recipient is the beneficial owner. Interest to governments and central banks is exempt in the source State. The Article defines interest as income from debt-claims and excludes penalty charges. Where the beneficial owner has a permanent establishment or fixed base in the source State and the debt is effectively connected with it, business or professional income rules apply. Special-relationship adjustments restrict treaty application to arm's-length amounts.
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