The revised India-South Korea DTAA, in force since 12 September 2016, generally caps dividend withholding at 15%, interest at 10%, and royalties/fees for technical services at 10% -- and this platform could not confirm whether the treaty contains a Most Favoured Nation clause, so this should not be assumed either way without checking the treaty text.
The India-South Korea DTAA -- an original 1985 treaty, revised in 2015-2016
India's original DTAA with South Korea was signed on 19 July 1985. A revised treaty was signed on 18
May 2015, during Prime Minister Modi's visit to Seoul, entered into force on 12 September 2016, and took
effect in India for income years beginning on or after 1 April 2017. Commonly cited withholding rates
under the revised treaty are: dividends capped at 15% (down from 20% under the earlier treaty), interest
reduced to 10%, and royalties/fees for technical services capped at 10%. This platform sourced these rates
from secondary tax commentary rather than the treaty text itself, and recommends confirming the exact
applicable rate against the official treaty text for a specific transaction. The revised treaty also added
Mutual Agreement Procedure access for transfer-pricing disputes and enabled bilateral Advance Pricing
Agreements between the two countries' tax authorities.
An unresolved question -- does the treaty carry an MFN clause?
This platform could not confirm, from any source reviewed, whether the India-South Korea DTAA contains
a Most Favoured Nation clause of the kind found in India's treaties with the Netherlands, France,
Switzerland, Spain, and Sweden (each covered separately on this platform). Unlike Portugal, where this
platform separately confirmed the treaty contains no MFN clause at all, for South Korea the honest
position is that this platform simply found no evidence either way. Anyone considering an MFN-based
argument involving the India-South Korea treaty should confirm the treaty's protocol text directly with a
chartered accountant or tax counsel rather than assuming a clause exists (or does not) based on this
platform's other country guides.
Practical filing points for an NRI connected to South Korea
Indian-source income paid to a South Korea resident is subject to Section 195 TDS, generally at the
rates set by the Income Tax Act unless a lower treaty rate applies and is properly claimed with a Tax
Residency Certificate and Form 10F. Form 15CA (and Form 15CB where applicable) is required before
remittance abroad. Because many Indian professionals in South Korea are on short 1-3 year contracts (per
the Embassy of India, Seoul's own description of the community as a “floating population”),
residential-status determination under the Indian Income Tax Act may need more frequent review than for an
NRI with a longer-settled connection to a country.
Common mistakes in this area for NRIs connected to South Korea:
- Assuming the India-South Korea treaty does or does not have an MFN clause without confirming the
treaty text directly.
- Applying a withholding rate from the original 1985 treaty rather than the revised, in-force-since-
2016 treaty.
- Not reassessing Indian residential status when a short-term Korean work contract ends or
renews.
