The Singapore-India Double Tax Treaty

This article provides a brief analysis of the Avoidance of Double Tax Agreement (DTA) between Singapore and India. Note that the information provided is for general guidance only and not meant to replace professional advice. A DTA between Singapore and another jurisdiction serves to prevent double taxation of income earned in one jurisdiction by a resident of the other jurisdiction. A DTA also makes clear the taxing rights between Singapore and her treaty partner on different types of income arising from cross-border economic activities between the two jurisdictions. The agreements also provide for reduction or exemption of tax on certain types of income.

Singapore-India DTA

Snapshot

The table below provides an at-a-glance summary of the key features of the Singapore-India DTA.

Topic Treaty provisions
Scope of DTA Tax residents of Singapore and tax residents of India.
Taxes Covered by the DTA Income tax.
Income from Immovable Property Taxed in the country in which the property is located.
Business Profits Taxed in the country in which the enterprise is present.
Airline/Shipping Profits Taxed in the operator’s country of residence.
Dividends – Indian tax on dividends received by Singapore-resident shareholders from an Indian company: 15% on gross dividend income.- Singapore tax exemption for dividends received by Indian-resident shareholders from a Singapore company.
Interest Taxed at a rate of 15% in the country in which the interest income arises (i.e. source country). May be taxed in recipient country as well.
Royalties Taxed at a rate of 10% in the country in which the royalty income arises (i.e. source country). May be taxed in recipient country as well.
Fees for Technical Services Taxed at a rate of 10% in the country in which the income arises (i.e. source country). May be taxed in recipient country as well.
Directors’ fees Taxed in the country in which the company paying the fees is resident.
Personal/Professional Services Income Taxed in the recipient’s country of residence. Tax exemptions apply under certain conditions (see below).
Employment Income Taxed in the country in which employment is exercised. Tax exemptions apply under certain conditions (see below).
Income of Artists and Sportsmen Taxed in the country in which the activities are performed. Tax exemptions apply under certain conditions (see below).
Non-government Pension & Annuity Taxed in the recipient’s country of residence.
Government Payments Remuneration of government officials is taxed by the relevant government unless the official is a permanent resident or citizen of the country in which the services are performed.
Payments made to Visiting Students or Trainees Overseas payments made to visiting students or business apprentices for their education, training or maintenance are exempt from tax in the visiting country in which they are pursuing their education or training.
Payments made to Visiting Teachers or Researchers Payments made to visiting teachers or researchers for their teaching services or research activities are exempt from tax in the visiting country in which they are offering their teaching services or conducting research.
Method of Relieving Double Taxation In India: Relief by deductionIn Singapore: Tax credit relief

Scope of DTA

The tax treaty provisions apply to tax residents of Singapore and India. Note however that the benefits of the Protocol do not extend to a shell company that claims to be a resident of either of the contracting countries. A shell company is any legal entity falling within the definition of ‘resident’ with negligible or nil business operations or with no real and continuous business activities carried out in that contracting country. A resident of a contracting country is deemed to be a shell company if its total annual expenditure on operations in that contracting country is less than S$200,000 or Rs. 50,00,000 as the case may be, in the immediately preceding period of 24 months from the date the gains arise.

Taxes covered by the DTA

  • In India: Income Tax including any surcharges.
  • In Singapore: Income Tax.

Taxation of Income from Immovable Property

Income derived from the direct use of or letting or any other form of use of immovable property is subject to tax in the country in which the property is located. This includes real-estate income of an enterprise as well as income from immovable property that is used for carrying out professional services. What constitutes immovable property depends upon the law of the country in which the property is situated. Note that ships and aircraft do not constitute immovable property.

Taxation of Business Profits

Business income or profits of an enterprise are taxable in the country in which the enterprise is resident. However, if the enterprise carries out business in the other contracting country through a permanent establishment situated in that contracting country, then the profits or income derived from that permanent establishment alone will be liable to tax in the other contracting country.

Taxation of Shipping and Air Transport Income

  • Profits derived from the operation of ships or aircraft in international traffic by a resident of one contracting country is liable to tax in that country only (i.e country of residence of the operator).
  • Shipping and air-transport income includes:
    • Profits from participation in a pool, a joint business, or an international operating agency engaged in the operation of ships or aircraft.
    • Interest on funds connected with the operation of ships or aircraft in international traffic.
    • Profits derived from the transportation by sea or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of the ships or aircraft including profits from:
      • The sale of tickets for such transportation on behalf of other enterprises;
      • The incidental lease of ships or aircraft used in such transportation;
      • The use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with such transportation; and
      • Any other activity directly connected with such transportation.

Taxation of Dividend Income

  • Dividends paid by a company that is a resident of one contracting country to a resident of the other contracting country may be taxed in that other country (i.e recipient’s country of residence). However, such dividends may also be taxed in the source country as follows:
    • 15% of the gross amount of the dividends. Note however, that if the recipient is a company that owns at least 25% of the shares of the company paying the dividends then a reduced tax rate of 10% of the gross amount of the dividends will apply.
    • Since there is no dividend tax in Singapore, Indian-resident shareholders who derive dividends from a Singapore-resident company or a Malaysian-resident company that has a source of profit in Singapore, are exempt from Singapore tax on the dividend income.
  • Note that the above provisions relating to dividend income do not apply if the recipient of the dividend income: a) has a permanent establishment in the country in which the company paying the dividend is resident or b) performs independent personal services from a fixed base that is situated in the country in which the company paying the dividend is resident, and that the holding giving rise to the dividends is effectively connected with that permanent establishment or fixed base. In such cases, the dividend income will be treated as income of the permanent establishment or as income derived from the performance of personal services and will be taxed accordingly.
  • Dividend income refers to income from shares or other corporate rights that is subject to the same taxation treatment as income from shares.

Taxation of Interest Income

  • Interest arising in a contracting country and paid to a resident of the other contracting country may be subject to taxation in the recipient country. However, such interest may also be taxed in the source country as follows:
    • 10% of the gross amount of the interest if such interest is paid on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution (including an insurance company);
    • 15% of the gross amount of the interest in all other cases.
  • Note that the above provisions relating to interest income do not apply if the recipient of the interest income: a) has a permanent establishment in the country in which the interest income arises or b) performs independent personal services from a fixed base that is situated in the country in which the interest income arises, and that the indebtedness giving rise to the interest is effectively connected with that permanent establishment or fixed base. In such cases, the interest income will be treated as income of the permanent establishment or as income derived from the performance of personal services and will be taxed accordingly.
  • If due to a special relationship that exists between the borrower and lender, the interest paid exceeds an amount which both the parties might have agreed upon in the absence of such a relationship, the above tax rate will apply only to this agreed upon amount and not the excess amount paid.
  • Interest income refers to income from government securities; income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures; or any other debt-claims whether or not secured by mortgage.

Taxation of Royalties

  • Royalty income arising in a contracting country and paid to a resident of the other contracting country may be subject to taxation in the recipient country. However, royalties may also be taxed in the source country at the rate of 10% of the gross amount of the royalties for the use or right to use any copyright of a literary, artistic or scientific work, including films or tapes used for radio or television broadcasting; any patent; trade mark; design or model; plan; secret formula or process; or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right, property or information as well as for the use or right to use any industrial, commercial or scientific equipment. It does not include payments received for sharing technical knowledge, experience, skill, know-how or processes.
  • Note that the above provisions relating to royalty income do not apply if the recipient of the royalty income: a) has a permanent establishment in the country in which the royalty income arises or b) performs independent personal services from a fixed base that is situated in the country in which the royalty income arises, and that the right, property or contract in respect of which the royalties are paid is effectively connected with that permanent establishment or fixed base. In such cases, the royalty income will be treated as income of the permanent establishment or as income derived from the performance of personal services and will be taxed accordingly.
  • If due to a special relationship that exists between the payer and the recipient of the royalties, the amount of royalties paid exceeds an amount which both the parties might have agreed upon in the absence of such a relationship, the above tax rate will apply only to this agreed upon amount and not the excess amount paid.

Taxation of Fees for Technical Services

  • Fees for technical services arising in a contracting country and paid to a resident of the other contracting country may be subject to taxation in the recipient country. However, technical services fees may also be taxed in the source country at 10% of gross amount of fees.
  • Note that the above provisions relating to technical services fees do not apply if the recipient of the fees: a) has a permanent establishment in the country in which the fees arises or b) performs independent personal services from a fixed base that is situated in the country in which the fees arises, and that the right, property or contract in respect of which the fees are paid is effectively connected with that permanent establishment or fixed base. In such cases, the fees will be treated as income of the permanent establishment or as income derived from the performance of personal services and will be taxed accordingly.
  • If due to a special relationship that exists between the payer and the recipient of the fees, the amount of fees paid exceeds an amount which both the parties might have agreed upon in the absence of such a relationship, the above tax rate will apply only to this agreed upon amount and not the excess amount paid.
  • Fees for technical services includes payments made for services of a managerial, technical or consultancy nature.

Taxation of Directors’ Fees

Directors’ fees or other similar payments received by the resident of one contracting country in his capacity as a director of a company that is resident in the other contracting country will be taxed in that other contracting country. In other words, directors’ fees are liable to taxation in the country in which the company paying the fees is resident.

Taxation of Professional Services Income

  • Income derived by the resident of one contracting country in relation to personal or professional services is subject to tax only in that contracting country except under the following circumstances, in which case the income is liable to taxation in the other contracting country as well:
    • If the person regularly performs activities from a fixed base in the other contracting country; in such cases only that portion of income that is attributable to the fixed base is liable to taxation in the other contracting country.
    • If the person stays in the other contracting country for 90 days or more in a given fiscal year; in such cases only that portion of income derived from activities performed in that other contracting country may be taxed in that other contracting country.
  • Professional services includes independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.

Taxation of Employment Income

  • Salaries, wages and other similar remuneration in respect of employment will be subject to tax in the country in which the employment is exercised. However, the employment income will be subject to tax in the recipient’s country of residence and not the contracting country in which the employment is exercised under the following circumstances:
    • The individual spends 183 days or less in the country in which employment is exercised for a given fiscal year.
    • The remuneration is paid by, or on behalf of, an employer who is not a resident of the country in which the employment is exercised.
    • The remuneration is not borne by a permanent establishment or a fixed base in the country in which the employment is exercised.
    • The remuneration is derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic.

Taxation of Income Derived by Artists and Sportsmen

Income derived by artistes (i.e. theatre, motion picture, radio or television artiste or a musician) and sportsmen will be taxed in the country in which the activities are performed. However, if the activities are supported wholly or substantially from public funds of the other contracting country and not the country in which the activities are performed then such income will be taxed in that other contracting country.

Taxation of Government Service Remuneration and Pension

  • Remuneration and pension paid by the government of one contracting country to any individual for services rendered on behalf of that government is taxable in that contracting country only, except in cases where the individual is a resident and a citizen of the other contracting country. In other words, remuneration and pension paid by the Government of India to any individual for services rendered on behalf of the Indian Government is exempt Singapore tax, except in cases where the individual is resident in Singapore and is not a citizen of India. Similarly, remuneration and pension paid by the Government of Singapore to any individual for services rendered on behalf of the Singapore Government is exempt from tax in India, except in cases where the individual is resident in India and is not a Singapore citizen.
  • Note that the above provisions do not apply to income from services rendered in connection with a Government business enterprise (i.e. a trade or business carried on by a Government for purposes of profit).

Taxation of Non-Government Pension and Annuity

  • Non-government pension and annuity (i.e. pension and annuity that is not connected to services rendered in the discharge of Governmental functions) is subject to taxation in the recipient’s country of residence.
  • Pension refers to a periodic payment made for past services rendered or compensation for injuries received in the course of performance of services.
  • Annuity refers to a stated sum payable periodically at stated times during life or during a specified period of time, under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

Taxation of Payments Made to Students and Trainees

  • Students and business/technical apprentices who are residents of one contracting country and are presently visiting the other contracting country solely for education or training will not be taxed in this other contracting country on:
    • Payments received from overseas for their maintenance, education, study, research or training.
    • Any amount received as a grant, allowance, or award for the purpose of study, research or training.
    • Any remuneration not exceeding US$500 per month or its equivalent in local currency in respect of services performed in connection with study, research or training or for the purposes of maintenance.

Taxation of Payments Made to Teachers and Researchers

Visiting teachers and researchers who are residents of one contracting country and are presently visiting the other contracting country solely for the purpose of teaching or research at an educational institution for a maximum period of up to two years will not be taxed in this other contracting country on any remuneration for such teaching or research. Note that this not apply to income from research, if such research is undertaken primarily for the private benefit of a specific person.

Taxation of Profits of Associated Enterprises

Where an enterprise of one contracting country participates directly or indirectly in the management, control or capital of an enterprise of the other contracting country, and conditions are imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, may be included in the profits of that enterprise and taxed accordingly.

Taxation of Capital Gains

  • Gains derived by a resident of one contracting country from the alienation of immovable property that is situated in the other contracting country may be taxed in that other country.
  • Gains derived by an enterprise or resident of one contracting country from the alienation of movable property of its permanent establishment or fixed base that is situated in the other contracting country may be taxed in that other contracting country.
  • Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft are taxable in the recipient’s country of residence.
  • Any other gains are taxable in the recipient’s country of residence.

Note: Singapore has abolished capital gains tax.

Double Taxation Relief

  • In India: India offers its residents double taxation relief by deduction i.e. domestic tax is applied on the income after deducting Singapore tax suffered.
  • In Singapore: Singapore offers its residents tax credit relief for double taxation of income. In other words, Indian tax paid in respect of income from sources within India shall be allowed as a credit against Singapore tax payable in respect of that income.

Exchange of Information

  • The tax authorities of the contracting countries shall exchange tax information as and when necessary.
  • The information exchanged will remain confidential and will only be disclosed to persons (including a court or administrative body) concerned with the assessment, collection,e enforcement or prosecution in respect of the taxes covered by the DTA.
  • There will be no disclosure of any trade, business, industrial or professional secret or trade process.

For more details on the specific provisions covered under the tax treaty between Singapore and India, please refer to IRAS Website.

For general information on Singapore DTAs, refer to Singapore Double Taxation Agreements (DTA) Guide.

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