background image
Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

ARTICLE 14

Permanent Establishment Tax

(1) A company which is a resident of India may be subject in the United States to a tax in addition to the tax allowable under the other provisions of this Convention.

  • (a) Such tax, however, may be imposed only on:
    • (i) the portion of the business profits of the company subject to tax in the United States which represents the dividend equivalent amount; and
    • (ii) the excess, if any, of interest deductible in the United States in computing the profits of the company that are subject to tax in the United States and either attributable to a permanent establishment in the United States or subject to tax in the United States under Article 6 (Income from Immovable Property (Real Property)), Article 12 (Royalties and Fees for Included Services) as fees for included services, or Article 13 (Gains) of this Convention over the interest paid by or from the permanent establishment or trade or business in the United States.
  • (b) For purposes of this article, business profits means profits that are effectively connected (or treated as effectively connected) with the conduct of a trade or business within the United States and are either attributable to a permanent establishment in the United States or subject to tax in the United States under Article 6 (Income from Immovable Property (Real Property)), Article 12 (Royalties and Fees for Included Services) as fees for included services or Article 13 (Gains) of this Convention.
  • (c) The tax referred to in sub-paragraph (a) shall not be imposed at a rate exceeding:
    • (i) the rate specified in paragraph 2(a) of Article 10 (Dividends) for the tax described in sub-paragraph (a)(i); and
    • (ii) the rate specified in paragraph 2(a) or (b) (whichever is appropriate) of Article 11 (Interest) for the tax described in sub-paragraph (a)(ii).

(2) A company which is a resident of the United States may be subject to tax in India at a rate higher than that applicable to the domestic companies. The difference in the tax rate shall not, however, exceed the existing difference of 15 percentage points.

(3) In the case of a banking company which is a resident of the United States, the interest paid by the permanent establishment of such a company in India to the head office may be subject in India to a tax in addition to the tax imposable under the other provisions of this Convention at a rate which shall not exceed the rate specified in paragraph 2(a) of Article 11 (Interest).