The India-Bhutan DTAA, signed 4 March 2013 and in force since 17 July 2014, applies a confirmed 10% cap across dividends, interest, and royalties/fees for technical services, per secondary tax-advisory sources -- this platform flags that it could not verify these rates against the primary Income Tax Department treaty text and found no evidence of an MFN clause in the treaty.
The India-Bhutan DTAA -- confirmed dates, rates flagged as needing primary verification
An India-Bhutan Double Taxation Avoidance Agreement was signed 4 March 2013 in New Delhi and entered
into force 17 July 2014, applicable from the Indian fiscal year beginning 1 April following entry into
force -- confirmed through a government press release and a Ministry of External Affairs notification.
Per a secondary tax-advisory summary of the treaty's articles, dividends are capped at 10% of the gross
amount, interest is capped at 10% (with an exemption for central and development banks of either
country), and royalties and fees for technical or professional services are capped at 10%. This
platform flags that these rates come from a secondary source, not the Income Tax Department's own
primary treaty text (which could not be reached during this research), and recommends confirming the
exact figures against the Department's published treaty text before relying on them for a specific
transaction. This platform also found no evidence of a Most-Favoured-Nation clause in this treaty and
recommends treating that absence as unconfirmed rather than a settled negative -- readers relying on
potential MFN treatment should confirm directly with a chartered accountant.
TDS under Section 195, and getting a lower or nil TDS certificate
Section 194-IA's 1% TDS applies only to resident sellers. For a non-resident seller, the buyer must
instead deduct TDS under Section 195, generally on the full sale consideration at the capital-gains rate
unless a lower-deduction certificate has been obtained. An NRI seller in Bhutan can apply to the
jurisdictional Assessing Officer, via Form 13 under Section 197, for a certificate authorizing TDS at a
lower or nil rate based on the actual computed gain -- worth evaluating with a chartered accountant
before the sale closes.
Repatriation of funds via FEMA, and the Bhutan-India currency relationship
Net proceeds from an Indian property sale are typically credited to the NRI's NRO account in India.
FEMA rules permit repatriation abroad of up to USD 1 million (or equivalent) per financial year,
cumulative across eligible remittances from that account, subject to the authorized dealer bank
receiving Form 15CA (and Form 15CB where applicable). Readers moving funds between India and Bhutan
specifically should be aware that the Bhutanese Ngultrum is pegged to the Indian Rupee at par (1:1), a
long-standing arrangement since the Ngultrum's 1974 introduction -- though this platform could not
independently confirm from a primary Royal Monetary Authority of Bhutan source whether the Indian Rupee
is formally recognized as legal tender within Bhutan, as opposed to simply being widely accepted in
practice, and recommends confirming current currency-acceptance rules before relying on cash INR for a
transaction in Bhutan.
Common mistakes in this process:
- Relying on secondary-source DTAA rates without confirming them against the Income Tax
Department's own published treaty text for a significant transaction.
- Assuming an MFN clause applies to this treaty without confirmation -- this platform found no
evidence one exists.
- Not applying for the Section 197 lower-deduction certificate before a property sale closes.
