Designed to eliminate double taxation, the DTAA between India and Japan plays a vital role in simplifying cross-border tax obligations. For NRIs having Japanese nationals earning in India, it provides a clear framework for allocating taxing rights, avoiding disputes, and reducing overall tax liability. The treaty offers foreign tax credits and sets lower TDS rates on income such as dividends, interest, royalties, and fees for technical services. By ensuring tax certainty, it promotes foreign investment, boosts bilateral trade, and strengthens economic ties between the two nations while encouraging smoother business and professional exchanges across borders. [1]
DTAA Between India and Japan - Quick Information
For a quick reference, the table below summarises the essential details of the tax treaty established between the governments of India and Japan.
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| Feature | Details |
|---|---|
| Agreement Name | Convention between India and Japan to avoid double taxation and prevent tax evasion. |
| Countries Involved | The Republic of India and Japan. |
| Last Updated | This agreement has been in force since 2006, replacing an earlier one aligned with modern international tax standards. |
| Year Signed | The DTAA agreement between India and Japan dates to 1989, with a later comprehensive convention. –[1] |
| Income Types Covered | Income from business, shipping, air transport, dividends, interest, royalties, technical service fees, capital gains, personal services, and salaries. |
| Key Forms | Tax Residency Certificate [TRC], Form 10F. Having a clear understanding of Form 15CA and 15CB for NRIs is also essential. |
| Tax Relief Methods | Primarily uses the Credit Method, where the residence country credits taxes paid in the source country. |
| Common TDS Rate | 10% on dividends, interest, royalties, and fees for technical services. |
| Authority Handling DTAA | The Central Board of Direct Taxes [CBDT] in India and the National Tax Agency [NTA] in Japan. |
| Applies To | Residents [individuals, companies, partnerships, etc.] of India and/or Japan. |
| Governing Bodies | The respective tax departments of the national governments. |
Objective of the DTAA Between India and Japan
The primary goal of the DTAA between India and Japan is to create a system where income earned across borders is taxed fairly, without the burden of double taxation. This treaty promotes economic collaboration by enhancing the attractiveness of cross-border trade and investment. It also establishes a clear and transparent framework to prevent tax evasion through cooperation and the exchange of information.[1]
Key Features of India-Japan DTAA
The agreement contains several important provisions that define its application and the benefits it offers. Below are the key features of this significant tax treaty.
Scope of the agreement
The treaty applies to taxes on income imposed by both nations. In India, this primarily covers the DTAA income tax between India and Japan. For Japan, this includes income tax and corporate tax. The agreement ensures that any identical or similar taxes will also be covered.[1][4]
Who can claim DTAA benefits [residents, companies, trusts, etc.]?
The benefits of this tax treaty are available to any person or entity that qualifies as a 'resident' of one or both countries. This includes individual taxpayers, companies, partnerships, and any other body of persons that is considered a single taxable unit under the respective domestic tax laws of India and Japan.[1][4]
What are the Tax Relief Methods Used in India-Japan DTAA?
This means that if an Indian resident pays tax on income earned in Japan, India will allow that tax amount as a credit against the tax payable in India on that same income, ensuring a fair outcome. Japan offers a reciprocal benefit to its residents. Basic income tax rules for NRIs can help in understanding this principle.[1][4]
DTAA Rates Between India and Japan
A key advantage of the treaty is the concessional tax rates it offers on certain cross-border payments. The DTAA rates between India and Japan are generally lower than the standard domestic rates.–[2]
| Income Type | DTAA Tax Rate | Article Reference |
|---|---|---|
| Dividends | 10% of the gross amount | Article 10 |
| Interest | 10% of the gross amount | Article 11 |
| Royalties and Fees for Technical Services | 10% of the gross amount | Article 12 |
| Business Profits [if no Permanent Establishment] | Taxable only in the country of residence | Article 7 |
What are the Documents required to claim DTAA TDS
To take advantage of the lower Tax Deducted at Source [TDS] rates under the treaty, a non-resident must provide the following key documents to the entity making the payment.
- A valid Tax Residency Certificate [TRC] issued by the tax authorities of their country of residence.
- A self-attested copy of their Permanent Account Number [PAN] Card, if applicable.
- A duly filled and signed Form 10F.
- A declaration confirming that they do not have a Permanent Establishment [PE] in the source country.
How to Claim DTAA Benefits?
The process for claiming DTAA benefits varies depending on where you reside and where your income originates.
In India [for Indian residents earning in Japan]
- Declare Global Income: NRI filing ITR in India, you are obligated to report your entire global income, which includes any earnings from sources in Japan.
- Provide Proof of Tax Paid in Japan: You must have official documentation, such as tax payment receipts from Japanese tax authorities, to prove that tax has already been paid on that income in Japan.
- File Form 67: Before submitting your Indian tax return, you must file Form 67 online. This form details your foreign-sourced income and the foreign tax paid on it.
- Claim Foreign Tax Credit [FTC]: In your Income Tax Return [ITR], you can then claim a credit for the taxes paid in Japan. This credit directly reduces your tax liability in India, preventing double taxation. Managing such funds is easier when you know the difference between NRE and NRO accounts.
In Japan [for NRIs earning in India]
- Submit Documents to Indian Payer: To ensure the lower TDS rate is applied in India, you must provide your TRC from Japan, a PAN copy, and a completed Form 10F to the Indian entity paying you [e.g., a company paying dividends or a tenant paying rent].
- Ensure Lower TDS Deduction: Once these documents are verified, the Indian payer will deduct TDS at the concessional treaty rate of 10%, instead of a potentially higher domestic rate. Applying for a lower TDS certificate for NRIs can also facilitate this process.
- Report Indian Income in Japan: You must declare the income earned from India when filing your tax return in Japan.
- Claim Tax Credit in Japan: Under Japanese tax laws and the DTAA, you can claim a credit for the taxes paid in India, which will be offset against your tax liability in Japan. For managing your affairs, a reliable NRI power of attorney guide can be incredibly useful.
DTAA TDS Rate Chart [2025] – India-Japan
When an Indian entity makes a payment to a resident of Japan, the DTAA specifies the maximum Tax Deducted at Source [TDS] that can be applied, ensuring favourable rates for the recipient.–[2]
| Nature of Payment | Recipient [Resident of Japan] | TDS Rate under DTAA |
|---|---|---|
| Dividends | Company or Individual | 10% |
| Interest | Company or Individual | 10% |
| Royalties | Company or Individual | 10% |
| Fees for Technical Services [FTS] | Company or Individual | 10% |
| Sale of Immovable Property by an NRI | Company or Individual | Governed by Capital Gains article. Specific rules like TDS on sale of property by an NRI are applicable. |
DTAA Impact on NRIs and Investors
The DTAA applicable between Japan and India has a profoundly positive impact on NRIs and investors by creating a stable and efficient financial corridor between the two nations.
- Financial Predictability: The treaty provides a clear set of rules, removing uncertainty about tax liabilities. This predictability is vital for businesses and individuals when making long-term investment decisions.[1][4]
- Reduced Tax on Royalties and Fees: Article 12 of the India-Japan DTAA caps tax on royalties and technical service fees at 10%, benefiting technology, software, and consulting firms in cross-border operations. [1][5]
- Encourages Technology and Capital Flow: By lowering the tax barrier on dividends, interest, and technology-related fees, the agreement promotes the flow of capital and technical expertise from Japan to India and vice versa, boosting economic growth in key sectors.[1] [5]
- Protection for Property Investors: The treaty offers clear rules on the taxation of capital gains from property. This helps NRIs who are considering buying a resale home from an NRI or investing in new real estate by providing certainty on how gains from a future sale will be taxed.
- Enhanced Cooperation: The agreement includes provisions for the exchange of information, which helps tax authorities in both countries to prevent tax evasion and ensure that the treaty benefits are claimed legitimately.[1][4]
How NoBroker Can Help with NRI Services?
Navigating the nuances of the DTAA between India and Japan can be a complex task, especially for NRIs managing investments from afar. NoBroker offers exclusive services for NRI property owners designed to handle these challenges. Our experts can assist with property management, legal formalities like conducting legal due diligence for NRIs investing in Indian real estate, and guidance on tax compliance, ensuring your affairs are managed efficiently and in line with all legal requirements.
Know More How DTAA Works in India with Different Countries:
