US companies earning income from India, such as royalties, dividends, interest, or fees for technical services, face a default TDS rate of 20% (plus surcharge and cess) under Section 115A of the Direct Tax Code 2025. Under the India-US Double Tax Avoidance Agreement (DTAA), this rate can be reduced to 10% to 15% depending on the income type. To claim these benefits, a US company must obtain a Tax Residency Certificate, file Form 10F, and submit a No PE Declaration.

• Default TDS under Section 115A: 20% + surcharge + cess
• DTAA-reduced rate for royalties and FTS (India-US): 10% to 15%
• Key prerequisite: PAN card, Income Tax login, and DSC of an authorised foreign signatory

What Is the India-US DTAA?

The India-US Double Tax Avoidance Agreement is a bilateral tax treaty that prevents the same income from being taxed twice, once in India and once in the United States. As of July 2026, this treaty governs how Indian-source income earned by US entities is taxed, and it overrides domestic law where the treaty rate is more beneficial to the taxpayer.

For US companies receiving payments from Indian clients or subsidiaries, the DTAA determines the maximum withholding tax rate India can impose. This directly affects the after-tax cash flows of cross-border transactions involving software licensing, management fees, interest income, and technical services.

What Income Types Does the DTAA Cover?

The India-US DTAA applies across several categories of cross-border income. Each type carries its own withholding rate and compliance requirements.

Income Type	Rate Under Section 115A	Rate Under India-US DTAA
Royalties	20% + surcharge + cess	10% to 15%
Fees for Technical Services (FTS)	20% + surcharge + cess	10% to 15%
Interest Income	20% + surcharge + cess	10% to 15%
Dividends	20% + surcharge + cess	15% (if 10%+ shareholding)
Business Profits (with PE in India)	Taxable as business income	Taxable only if PE exists

Note: If you pay tax under Section 115A for royalties or FTS and do not claim the DTAA benefit, filing an Indian ITR is not mandatory. However, if you claim DTAA benefits, filing the ITR in India becomes compulsory.

Key DTAA Benefits for US Companies

Reduced Withholding Tax Rates

The most direct benefit is a lower TDS rate. A US company receiving a ₹1 crore royalty payment from an Indian client will have ₹20 lakh withheld under Section 115A. Under the DTAA, that drops to ₹10–15 lakh, retaining more working capital in the US entity.

Elimination of Double Taxation

Income taxed in India can be credited against US tax liability using the Foreign Tax Credit mechanism under the US Internal Revenue Code. The DTAA ensures that the income is not taxed in full in both jurisdictions, protecting profitability on India-originated revenue streams.

Permanent Establishment Protection

Under the DTAA, business profits of a US company are taxable in India only if the company has a Permanent Establishment (PE) in India. A US company providing remote services without a fixed place of business, dependent agent, or construction project in India is not subject to Indian business profit tax.

This is why a properly drafted No PE Declaration is a mandatory compliance document when claiming DTAA benefits. It certifies that the US entity does not have a taxable presence in India.

Certainty and Legal Protection

The DTAA provides a legal framework that Indian tax authorities must follow. Once a US company correctly establishes its treaty eligibility, Indian payers are legally bound to apply the reduced withholding rate, reducing the risk of arbitrary over-withholding.

What Documents Are Required to Claim DTAA Benefits?

To successfully claim India-US DTAA benefits, a US company must submit the following documents to the Indian payer before any payment is made:

• Tax Residency Certificate (TRC): Issued by the US Internal Revenue Service (IRS), confirming the company is a US tax resident.
• Form 10F: Filed electronically on the Indian Income Tax portal, linking the TRC details to the Indian tax system.
• No PE Declaration: A self-declaration confirming the US company has no Permanent Establishment in India.
• PAN Card: A Permanent Account Number must be obtained for the US company in India. Without PAN, the payer is required to deduct TDS at higher rates.
• Income Tax Login: An active Income Tax e-filing login in India is required to file Form 10F and, where applicable, the Indian ITR.
• DSC of Authorised Foreign Signatory: A Digital Signature Certificate (DSC) of the foreign authorised signatory is mandatory. A regular director DSC will not work. This requires email and phone OTP verification, video verification, address proof (such as a driving licence), a photo, and a copy of the passport of the foreign individual.

Obtaining a PAN card for a foreign company requires applying through Form 49AA along with supporting incorporation documents. Learn how to get a PAN card for a foreign company in India.

How to Claim DTAA Benefits (Step by Step)

1. Apply for PAN in India: File Form 49AA with the Indian Income Tax Department to obtain a PAN for the US company.
2. Create an Income Tax Login: Register the US company on the Indian Income Tax e-filing portal using the PAN. This login is needed to file Form 10F and future ITRs.
3. Obtain a DSC for the Foreign Signatory: The authorised signatory of the US company must obtain an organisational DSC. This involves OTP verification, video verification, and document submission (address proof, photo, passport copy).
4. Get the Tax Residency Certificate (TRC) from the IRS: Apply to the US Internal Revenue Service for a TRC confirming your status as a US tax resident for the relevant financial year.
5. File Form 10F on the Indian Portal: Log into the Indian Income Tax portal and electronically file Form 10F using the DSC of the authorised signatory.
6. Prepare the No PE Declaration: Draft and sign a No PE Declaration confirming the US company has no taxable presence (fixed place, agent, or construction activity) in India. See our detailed guide on No PE Declaration.
7. Submit Documents to Indian Payer: Provide the TRC, Form 10F acknowledgment, PAN, and No PE Declaration to the Indian company making the payment. They will apply the reduced DTAA rate at source.
8. File ITR in India (if claiming DTAA benefit): If you are claiming the lower DTAA rate (rather than paying 20% under Section 115A), you are required to file an ITR in India for the relevant financial year.

When Does the DTAA Not Apply?

The DTAA benefit is not automatic. It is denied or restricted in the following circumstances:

• The US company does not hold a valid TRC for the relevant period.
• Form 10F has not been filed on the Indian income tax portal.
• The US company has a Permanent Establishment in India, making its profits fully taxable in India under normal rates.
• The US company is a conduit entity or does not satisfy the Limitation of Benefits (LOB) provisions in the India-US treaty.
• PAN has not been obtained, resulting in TDS at a rate of 20% regardless of treaty claims.

DTAA Benefit vs Section 115A: Which Should You Choose?

Factor	Section 115A (No DTAA Claim)	India-US DTAA Benefit
TDS Rate on Royalties / FTS	20% + surcharge + cess	10% to 15%
ITR Filing Required in India?	No (for royalty/FTS only)	Yes
PAN Required?	Yes (else 20% TDS)	Yes (mandatory)
Form 10F Required?	No	Yes
DSC of Foreign Signatory?	No	Yes (organisational DSC)
Best For	Low-value, one-time transactions	Recurring, high-value payments

For US companies with recurring revenue streams from India, the DTAA route consistently delivers a lower effective tax burden despite the additional compliance requirements. The ITR filing obligation also establishes a formal tax presence in India, which can be beneficial for audit defence and treaty protection in future years.

US Companies with a Presence in India

If a US company intends to have a physical or operational presence in India beyond passive income collection, the DTAA analysis changes significantly. A PE in India means Indian business profits are taxable in India, and the reduced DTAA rate on royalties or FTS may not apply.

US companies typically establish an Indian presence through a wholly owned subsidiary, a liaison office, or a branch office. Each structure has different PE risk profiles and compliance obligations. Understanding the foreign company registration requirements in India before structuring transactions is critical to preserving DTAA benefits.

US companies with a registered subsidiary in India should also note the annual compliance calendar for foreign subsidiaries to ensure all Indian regulatory and tax filing deadlines are met.

How Taxocity Helps US Companies Claim DTAA Benefits

Taxocity, with over three decades of experience in Indian tax and corporate compliance, provides end-to-end support for US companies seeking DTAA benefits in India. Our team of real human experts handles every step from PAN application to DSC procurement for foreign signatories to Form 10F filing and Indian ITR preparation.

We offer a 100% compliance guarantee, ensuring all filings are accurate, timely, and aligned with the latest Indian tax regulations under the Direct Tax Code 2025. Whether you are receiving your first royalty payment from India or managing a multi-year licensing arrangement, Taxocity ensures you do not overpay TDS.

• PAN card application for foreign companies
• Income Tax login creation and DSC procurement for foreign signatories
• Form 10F electronic filing
• No PE Declaration drafting
• Indian ITR preparation and filing for DTAA claimants
• Ongoing compliance management for foreign subsidiaries in India

Talk to a DTAA Compliance Expert and ensure your US company claims every rupee of treaty benefit it is entitled to.

Key Takeaways

1. The default TDS rate for US companies on Indian royalties and FTS is 20% under Section 115A; the DTAA reduces this to 10-15%.
2. To claim DTAA benefits, a US company needs a PAN, Income Tax login, TRC from the IRS, Form 10F filed in India, and a No PE Declaration.
3. An organisational DSC of the authorised foreign signatory (not a regular director DSC) is mandatory for electronic filings on the Indian portal.
4. Claiming DTAA benefits (rather than paying at Section 115A rates) triggers a mandatory ITR filing obligation in India.
5. If a US company has a Permanent Establishment in India, its business profits are taxable in India at normal corporate rates, not the DTAA reduced rate.
6. Payments under the India-US DTAA must be structured carefully to avoid the Limitation of Benefits clause, which can deny treaty access to conduit structures.

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Disclaimer: This article is for informational purposes only and does not constitute tax advice. Tax laws are subject to change, and individual circumstances vary. Please consult a qualified tax advisor before making any decisions regarding DTAA claims or cross-border tax compliance.