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MINISTRY OF FINANCE
(Department of Revenue)
NOTIFICATION
New Delhi, the 1st April, 2021
(Income-tax)
S.O. 1442(E).—Whereas, an Agreement between the Government of the Republic of India and the
Government of the Islamic Republic of Iran for the avoidance of double taxation and prevention of fiscal
evasion with respect to taxes on income was signed at New Delhi on the 17th February, 2018 as set out in
the Annexure to this notification (hereinafter referred to as the „Agreement‟);
And whereas, the said Agreement entered into force on the 29th day of September, 2020, being the
date of the later of the notifications of the completion of the procedures required by the respective laws for
entry into force of the said Agreement, in accordance with paragraph 2 of Article 30 of the said Agreement;
And whereas, sub-paragraph (b) of paragraph 3 of Article 30 of the said Agreement provides that
the provisions of the Agreement shall have effect in India in respect of taxes on income arising in any fiscal
year beginning on or after the first day of April next following the calendar year in which the Agreement
enters into force;
Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-
tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of said
Agreement, as annexed hereto, shall be given effect to in the Union of India.
ANNEXURE
AGREEMENT
BETWEEN
THE GOVERNMENT OF
THE REPUBLIC OF INDIA
AND
THE GOVERNMENT OF
THE ISLAMIC REPUBLIC OF IRAN
FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL
EVASION
WITH RESPECT TO TAXES ON INCOME
The Government of the Republic of India and the Government of the Islamic Republic of Iran,
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Intending to conclude an Agreement for the elimination of double taxation with respect to taxes on income
without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance
(including also through treaty-shopping arrangements aimed at obtaining reliefs provided in this
Agreement for the indirect benefit of residents of third States),
Have agreed as follows:
Article 1
PERSONS COVERED
This Agreement shall apply to persons who are residents of one or both of the Contracting States.
Article 2
TAXES COVERED
1.
This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its
political subdivisions or local authorities, irrespective of the manner in which they are levied.
2.
There shall be regarded as taxes on income all taxes imposed on total income, or on elements of
income, including taxes on gains from the alienation of movable or immovable property, taxes on the total
amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.
3.
The existing taxes to which the Agreement shall apply are in particular:
a)
in the case of the Islamic Republic of Iran:
the income tax;
b)
in the case of India:
the income tax, including any surcharge thereon.
4.
The Agreement shall apply also to any identical or substantially similar taxes that are imposed
after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent
authorities of the Contracting States shall notify each other within a reasonable period of any significant
changes that have been made in their respective taxation laws.
Article 3
GENERAL DEFINITIONS
1.
For the purposes of this Agreement, unless the context otherwise requires:
a)
(i) the term “Islamic Republic of Iran” means the territory under the sovereignty and/or
jurisdiction of the Islamic Republic of Iran;
(ii) the term “India” means the territory of India and includes the territorial sea and
airspace above it, as well as any other maritime zone in which India has sovereign rights,
other rights and jurisdiction, according to the Indian law and in accordance with
international law, including the U.N. Convention on the Law of the Sea;
b)
the term “person” includes:
(i)
an individual;
(ii) a company, a body of persons and any other entity which is treated as a taxable unit
under the taxation laws in force in the respective Contracting States;
c)
the term “company” means any body corporate or any entity that is treated as a body
corporate for tax purposes;
d)
the terms “Contracting State” and “the other Contracting State” mean the Islamic Republic
of Iran or the Republic of India as the context requires;
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e)
the terms “enterprise of a Contracting State” and “enterprise of the other Contracting
State” mean respectively an enterprise carried on by a resident of a Contracting State and an
enterprise carried on by a resident of the other Contracting State;
f)
the term “international traffic” means any transport by a ship or aircraft operated by an
enterprise of a Contracting State, except when the ship or aircraft is operated solely between places
in the other Contracting State;
g)
the term “competent authority” means:
(i)
in the case of the Islamic Republic of Iran, the Minister of Economic Affairs and
Finance or his authorized representative;
(ii)
in India: the Finance Minister, Government of India, or his authorized
representative;
h)
the term “national”, in relation to a Contracting State, means:
(i)
any individual possessing the nationality of that Contracting State; and
(ii)
any legal person, partnership or association deriving its status as such from the
laws in force in that Contracting State.
2.
As regards the application of the Agreement at any time by a Contracting State, any term not
defined therein shall, unless the context otherwise requires, have the meaning which it has at that time
under the law of that State for the purposes of the taxes to which the Agreement applies and any meaning
under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of
that State.
Article 4
RESIDENT
1.
For the purposes of this Agreement, the term “resident of a Contracting State” means any person
who under the laws of that State is liable to tax therein by reason of his domicile, residence, place of
registration, place of incorporation, place of management or any other criterion of a similar nature, and also
includes that State and any political subdivision or local authority thereof. This term, however, does not
include any person who is liable to tax in that State in respect only of income from sources in that State.
2.
Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be determined as follows:
a)
he shall be deemed to be a resident only of the State in which he has a permanent home
available to him; If he has a permanent home available to him in both States, he shall be deemed to
be a resident only of the State with which his personal and economic relations are closer (center of
vital interests);
b)
if the State in which he has his center of vital interests cannot be determined, or if he has
not a permanent home available to him in either State, he shall be deemed to be a resident only of
the State in which he has an habitual abode;
c)
if he has an habitual abode in both States or in neither of them, he shall be deemed to be a
resident only of the State of which he is a national;
d)
if he is a national of neither of the States, and/ or if under the previous paragraphs, he may
not be deemed a resident of one of the Contracting States, then the competent authorities of the
Contracting States shall settle the question by mutual agreement.
3.
Where, by reason of the provisions of paragraph 1, a person other than an individual is a resident
of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of
effective management is situated.
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Article 5
PERMANENT ESTABLISHMENT
1.
For the purposes of this Agreement, the term “permanent establishment” means a fixed place of
business through which the business of an enterprise is wholly or partly carried on.
2.
The term “permanent establishment” includes especially:
a)
a place of management;
b)
a branch;
c)
an office;
d)
a factory;
e)
a workshop;
f)
a sales outlet;
g)
a warehouse in relation to a person providing storage facilities for others;
h)
a farm, plantation or other place where agricultural, forestry, plantation or related activities
are carried on; and
i)
a mine, an oil or gas well, a quarry or any other place of exploration, exploitation and/or
extraction of natural resources.
3.
a)
A building site, a construction, assembly or installation project or supervisory activities in
connection therewith, constitutes a “permanent establishment” but only if such site, project or
activities last more than 270 days.
b)
The furnishing of services, including consultancy services, by an enterprise through
employees or other personnel engaged by the enterprise for such purpose constitutes a “permanent
establishment”, but only where activities of that nature continue (for the same or connected
project) within the country for a period or periods aggregating more than 90 days within any 12-
month period.
4.
Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall
be deemed not to include:
a)
the use of facilities solely for the purpose of storage or display of goods or merchandise
belonging to the enterprise;
b)
the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the
purpose of storage or display;
c)
the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise;
d)
the maintenance of a fixed place of business solely for the purpose of purchasing goods or
merchandise, or of collecting information, for the enterprise;
e)
the maintenance of a fixed place of business solely for the purpose of carrying on, for the
enterprise, any other activity of a preparatory or auxiliary character;
f)
the maintenance of a fixed place of business solely for any combination of activities
mentioned in sub-paragraphs a) to e) provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or auxiliary character.
5.
Notwithstanding the provisions of paragraphs 1 and 2, where a person -other than an agent of
independent status to whom paragraph 7 applies- is acting in a Contracting State on behalf of an enterprise
of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the
first-mentioned Contracting State in respect of any activities which that person undertakes for the
enterprise, if such a person:
a)
has and habitually exercises in that State an authority to conclude contracts in the name of
the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4
which, if exercised through a fixed place of business, would not make this fixed place of business a
permanent establishment under the provisions of that paragraph; or
[भागII—खण् ड 3(ii)]
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b)
has no such authority, but habitually maintains in the first-mentioned State a stock of
goods or merchandise from which he regularly delivers goods or merchandise on behalf of the
enterprise; or
c)
habitually secures orders or issues performa invoices in the first-mentioned State, wholly
or almost wholly for the enterprise itself.
6.
Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting
State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other
Contracting State if it collects premiums in the territory of that other State or insures risks situated therein
through a person other than an agent of an independent status to whom paragraph 7 applies.
7.
An enterprise shall not be deemed to have a permanent establishment in the other Contracting State
merely because it carries on business in that other State through a broker, general commission agent or any
other agent of an independent status, provided that such persons are acting in the ordinary course of their
business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of
that enterprise, he will not be considered an agent of an independent status within the meaning of this
paragraph.
8.
The fact that a company which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on business in that other State
(whether through a permanent establishment or otherwise), shall not of itself constitute either company a
permanent establishment of the other.
Article 6
INCOME FROM
IMMOVABLE PROPERTY
1.
Income derived by a resident of a Contracting State from immovable property (including income
from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
2.
The term “immovable property” shall have the meaning, which it has under the law of the
Contracting State in which the property in question is situated. The term shall in any case include property
accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which
the provisions of general law respecting landed property apply, usufruct of immovable property and rights
to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources including oil, gas and quarries. Ships and aircraft shall not be regarded
as immovable property.
3.
The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in
any other form of immovable property.
4.
The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of
an enterprise and to the income from immovable property used for the performance of independent
personal services.
Article 7
BUSINESS PROFITS
1.
The profits of an enterprise of a Contracting State shall be taxable only in that State unless the
enterprise carries on business in the other Contracting State through a permanent establishment situated
therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the
other Contracting State but only so much of them as is attributable to that permanent establishment.
2.
Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on
business in the other Contracting State through a permanent establishment situated therein, there shall in
each Contracting State be attributed to that permanent establishment the profits which it might be expected
to make if it were a distinct and separate enterprise engaged in the same or similar activities, under the
same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent
establishment.
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3.
In determination of the profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the business of the permanent establishment, including
executive and general administrative expenses so incurred, whether in the State in which the permanent
establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of amounts,
if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to
the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar
payments in return for the use of patents, or other rights, or by way of commission for specific services
performed or for management, or, except in the case of banking enterprises, by way of interest on moneys
lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits
of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual
expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by
way of royalties, fees or other similar payments in return for the use of patents, or other rights, or by way
of commission or other charges for specific services performed or for management, or, except in the case
of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its
other offices.
4.
Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a
permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various
parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed
by such an apportionment as may be customary. The method of apportionment adopted shall, however, be
such that the result shall be in accordance with the principles contained in this Article.
5.
No profits shall be attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.
6.
For the purposes of the preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there is good and sufficient
reason to the contrary.
7.
Where profits include items of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.
Article 8
INTERNATIONAL TRAFFIC
1.
Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in
international traffic shall be taxable only in that State.
2.
For the purposes of this Article, interest on investments directly connected with the operation of
ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships
or aircraft if they are integral to the carrying on of such business, and the provisions of Article 11 shall not
apply in relation to such interest.
3.
The provisions of paragraph 1 of this Article shall also apply to profits from the participation in a
pool, a joint business or an international operating agency, but only to so much of the profits so derived as
is attributable to the participant in proportion to its share in the joint operation.
Article 9
ASSOCIATED ENTERPRISES
1.
Where
a)
an enterprise of a Contracting State participates directly or indirectly in the management,
control or capital of an enterprise of the other Contracting State, or
b)
the same persons participate directly or indirectly in the management, control or capital of
an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions are made or 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 so accrued to one of the
enterprises, but, by reason of those conditions, have not accrued, may be included in the profits of
that enterprise and taxed accordingly.
[भागII—खण् ड 3(ii)]
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2.
Where a Contracting State includes in the profits of an enterprise of that State - and taxes
accordingly- profits on which an enterprise of the other Contracting State has been charged to tax in that
other State and the profits so included are profits which would have accrued to the enterprise of the first-
mentioned State if the conditions made between the two enterprises had been those which would have been
made between independent enterprises, then that other State shall make an appropriate adjustment to the
amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had
to the other provisions of this Agreement and the competent authorities of the Contracting States shall, if
necessary consult each other.
Article 10
DIVIDENDS
1.
Dividends paid by a company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State.
2.
However, such dividends may also be taxed in the Contracting State of which the company paying
the dividends is a resident and according to the laws of that State, but if the beneficial owner of the
dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 (ten) per cent
of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in respect
of the profits out of which the dividends are paid.
3.
The term “dividends” as used in this Article means income from shares, “Jouissance” shares or
“Jouissance” rights, founders' shares or other rights (not being debt-claims, participating in profits), as well
as income from other corporate rights which is subjected to the same taxation treatment as income from
shares by the laws of the State of which the company making the distribution is a resident.
4.
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being
a resident of a Contracting State, carries on business in the other Contracting State of which the company
paying the dividends is a resident, through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein, and the holding in respect of
which the dividends are paid is effectively connected with such permanent establishment or fixed base. In
such case, the provisions of Article 7 or Article 15, as the case may be, shall apply.
5.
Where a company which is a resident of a Contracting State derives profits or income from the
other Contracting State, that other Contracting State may not impose any tax on the dividends paid by the
company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding
in respect of which the dividends are paid is effectively connected with a permanent establishment or a
fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the
company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or
partly of profits or income arising in such other State.
Article 11
INTEREST
1.
Interest arising in a Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.
2.
However, such interest may also be taxed in the Contracting State in which it arises and according
to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting
State, the tax so charged shall not exceed 10 (ten) per cent of the gross amount of the interest.
3.
Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be
exempt from tax in that State if it is paid to and beneficially owned by the Government of the other
Contracting State or its political subdivision or a local authority thereof, by the Central Bank of the other
Contracting State, or by an institution wholly owned and controlled by the Government of the other
Contracting State.
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4.
The term “interest” as used in this Article means income from debt-claims of every kind, whether
or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and in
particular, income from government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be
regarded as interest for the purpose of this Article.
5.
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a
resident of a Contracting State, carries on business in the other Contracting State in which the interest
arises, through a permanent establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is
paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions
of Article 7 or Article 15, as the case may be, shall apply.
6.
Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State.
Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has
in a Contracting State a permanent establishment or a fixed base, in connection with which the
indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent
establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.
7.
Where, by reason of a special relationship between the payer and the beneficial owner or between
both of them and some other person, the amount of the interest, having regard to the debt-claim for which
it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in
the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In such case, the excess part of the payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of this Agreement.
Article 12
ROYALTIES
1.
Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.
2.
However, such royalties may also be taxed in the Contracting State in which they arise, and
according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other
Contracting State, the tax so charged shall not exceed 10 (ten) per cent of the gross amount of the royalties.
3.
The term “royalties” as used in this Article means payments of any kind received as a
consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work
including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade
mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial,
commercial or scientific equipment, or for information concerning industrial, commercial or scientific
experience.
4.
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being
a resident of a Contracting State, carries on business in the other Contracting State in which the royalties
arise through a permanent establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein and the right or property in respect of which the
royalties are paid is effectively connected with such permanent establishment or fixed base. In such case,
the provisions of Article 7 or Article 15, as the case may be, shall apply.
5.
a)
Royalties shall be deemed to arise in a Contracting State when the payer is a resident of
that State. Where, however, the person paying the royalties, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in
connection with which the liability to pay the royalties was incurred, and such royalties are borne
by such permanent establishment, or fixed base, then such royalties shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is situated.
[भागII—खण् ड 3(ii)]
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b)
Where under sub-paragraph (a) royalties do not arise in one of the Contracting States, and
the royalties relate to the use of, or the right to use, the right or property, in one of the Contracting
States, the royalties shall be deemed to arise in that Contracting State.
6.
Where, by reason of a special relationship between the payer and the beneficial owner or between
both of them and some other person, the amount of the royalties, having regard to the use, right or
information for which they are paid, exceeds the amount which would have been agreed upon by the payer
and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according
to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
Article 13
FEES FOR TECHNICAL SERVICES
1.
Fees for technical services arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other Contracting State.
2.
However, such fees for technical services may also be taxed in the Contracting State in which they
arise, and according to the laws of that State, but if the recipient is the beneficial owner of the fees for
technical services and is a resident of the other Contracting State, the tax so charged shall not exceed 10
(ten) per cent of the gross amount of the fees for technical services.
3.
The term “fees for technical services” as used in this Article means payments of any kind, other
than those mentioned in Articles 12, 15 and 16 of this Agreement, as consideration for managerial or
technical or consultancy services, including the provision of services of technical or other personnel.
4.
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the fees for
technical services, being a resident of a Contracting State, carries on business in the other Contracting State
in which the fees for technical services arise, through a permanent establishment situated therein, or
performs in that other Contracting State independent personal services from a fixed base situated therein,
and the right or property in respect of which the fees for technical services are paid is effectively connected
with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as
the case may be, shall apply.
5.
a)
Fees for technical services shall be deemed to arise in a Contracting State when the payer
is a resident of that State. Where, however, the person paying the fees for technical services,
whether he is a resident of a Contracting State or not, has in a Contracting State a permanent
establishment or a fixed base in connection with which the liability to pay the fees for technical
services was incurred, and such fees for technical services are borne by such permanent
establishment, or fixed base, then such fees for technical services shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is situated.
b)
Where under sub-paragraph (a) fees for technical services do not arise in one of the
Contracting States, and the fees for technical services relates to services performed in one of the
Contracting States, the fees for technical services shall be deemed to arise in that Contracting
State.
6.
Where, by reason of a special relationship between the payer and the beneficial owner or between
both of them and some other person, the amount of the fees for technical services paid, exceeds the amount
which would have been agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the
excess part of the payments shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Agreement.
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Article 14
CAPITAL GAINS
1.
Gains derived by a resident of a Contracting State from the alienation of immovable property
referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
2.
Gains from the alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of
movable property pertaining to a fixed base available to a resident of a Contracting State in the other
Contracting State for the purpose of performing independent personal services, including such gains from
the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base
may be taxed in that other State.
3.
Gains from the alienation of ships or aircraft operated in international traffic or movable property
pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State of which
the alienator is a resident.
4.
Gains from the alienation of shares of the capital stock of a company, the property of which
consists directly or indirectly principally of immovable property situated in a Contracting State may be
taxed in that State.
5.
Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which
is a resident of a Contracting State may be taxed in that State.
6.
Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3, 4 and 5
shall be taxable only in the Contracting State of which the alienator is a resident.
Article 15
INDEPENDENT PERSONAL SERVICES
1.
Income derived by a resident of a Contracting State in respect of professional services or other
activities of an independent character shall be taxable only in that State except in the following
circumstances when such income may also be taxed in the other Contracting State:
a)
if he has a fixed base regularly available to him in the other Contracting State for the
purpose of performing his activities; in that case, only so much of the income as is attributable to
that fixed base may be taxed in that other State; or
b)
if his stay in the other Contracting State is for a period or periods amounting to or
exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the
fiscal year concerned; in that case, only so much of the income as is derived from his activities
performed in that other State may be taxed in that other State.
2.
The term “professional services” includes especially independent scientific, literary, artistic,
educational or teaching activities as well as the independent activities of physicians, engineers, surgeons,
lawyers, architects, dentists and accountants.
Article 16
DEPENDENT PERSONAL SERVICES
1.
Subject to the provisions of Articles 17, 19, 20, 21 and 22, salaries, wages and other similar
remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable
only in that state unless the employment is exercised in the other Contracting State. If the employment is so
exercised, such remuneration as is derived therefrom may be taxed in that other State.
2.
Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a
Contracting State in respect of an employment exercised in the other Contracting State shall be taxable
only in the first-mentioned State, if:
[भागII—खण् ड 3(ii)]
भारत का राजपत्र : ऄसाधारण
31
a)
the recipient is present in the other State for a period or periods not exceeding in the
aggregate 183 days in any twelve-month period commencing or ending in the fiscal year
concerned; and
b)
the remuneration is paid by, or on behalf of, an employer who is not a resident of the other
State; and
c)
the remuneration is not borne by a permanent establishment or a fixed base which the
employer has in the other State.
3.
Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international traffic, by an enterprise of a
Contracting State may be taxed in that State.
Article 17
DIRECTORS' FEES
Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a
member of the board of directors of a company which is a resident of the other Contracting State may be
taxed in that other State.
Article 18
ARTISTES AND SPORTSPERSONS
1.
Notwithstanding the provisions of Articles 15 and 16, income derived by a resident of a
Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a
musician, or as a sportsperson from his personal activities as such exercised in the other Contracting State,
may be taxed in that other State.
2.
Where income in respect of personal activities exercised by an entertainer or a sportsperson in his
capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income
may, notwithstanding the provisions of Articles 7, 15 and 16, be taxed in the Contracting State in which the
activities of the entertainer or sportsperson are exercised.
3.
The provisions of paragraphs 1 and 2 shall not apply to the income derived from activities
performed in a Contracting State by entertainers or sportspersons if the visit to that state is wholly or
mainly supported by public funds of the other State or political subdivisions or local authorities thereof. In
such a case, the income is taxable only in the Contracting State of which the entertainers or sportspersons
are resident.
Article 19
PENSIONS
Subject to the provisions of paragraph 2 of Article 20, pensions and other similar remuneration paid to a
resident of a Contracting State in consideration of past employment shall be taxable only in that State.
Article 20
Government Service
1.
a)
Salaries, wages and other similar remuneration, other than a pension paid by a Contracting
State or a political subdivision or a local authority thereof to an individual in respect of services
rendered to that State or subdivision or authority shall be taxable only in that State.
b)
However, such salaries, wages and other similar remuneration shall be taxable only in the
other Contracting State if the services are rendered in that other State and the individual is a
resident of that State who:
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THE GAZETTE OF INDIA : EXTRAORDINARY
[PART II—SEC. 3(ii)]
(i)
is a national of that State; or
(ii) did not become a resident of that State solely for the purpose of rendering the
services.
2.
a)
Any pension paid by, or out of funds created by, a Contracting State or a political
subdivision or a local authority thereof to an individual in respect of services rendered to that State
or subdivision or authority shall be taxable only in that State.
b)
However, such pension shall be taxable only in the other Contracting State if the
individual is a resident of, and a national of, that other State.
3.
The provisions of Articles 16, 17, 18 and 19 shall apply to salaries, wages and other similar
remuneration and to pensions, in respect of services rendered in connection with a business carried on by a
Contracting State or a political subdivision or a local authority thereof.
Article 21
PROFESSORS, TEACHERS AND RESEARCH SCHOLARS
1.
A professor, teacher or research scholar who is or was a resident of the Contracting State
immediately before visiting the other Contracting State for the purpose of teaching or engaging in research,
or both, at a university, college or other similar approved institution in that other Contracting State shall be
exempt from tax in that other State on any remuneration for such teaching or research for a period not
exceeding 2 years from the date of his first arrival in that other State.
2.
This Article shall apply to income from research only if such research is undertaken by the
individual in the public interest and not primarily for the benefit of some private person or persons.
Article 22
STUDENTS
1.
A student who is or was a resident of one of the Contracting States immediately before visiting the
other Contracting State and who is present in that other Contracting State solely for the purpose of his
education or training, shall besides grants, loans and scholarships be exempt from tax in that other State on:
a)
payments made to him by persons residing outside that other State for the purpose of his
maintenance, education or training; and
b)
remuneration which he derives from an employment which he exercises in the other
Contracting State if the employment is directly related to his studies.
2.
The benefits of this Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken, but in no event shall any individual
have the benefits of this Article, for more than seven consecutive years from the date of his first arrival for
the purpose of his education or training in that other State.
Article 23
OTHER INCOME
1.
Items of income of a resident of a Contracting State, wherever arising, not dealt with in the
foregoing Articles of this Agreement shall be taxable only in that State.
2.
The provisions of paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a
Contracting State, carries on business in the other Contracting State through a permanent establishment
situated therein, or performs in that other State independent personal services from a fixed base situated
therein and the right or property in respect of which the income is paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case
may be, shall apply.
[भागII—खण् ड 3(ii)]
भारत का राजपत्र : ऄसाधारण
33
3.
Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a
Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other
Contracting State may also be taxed in that other State.
Article 24
ELIMINATION OF DOUBLE TAXATION
It is agreed that double taxation shall be avoided in accordance with the following paragraphs of this
Article:
1.
In the case of the Islamic Republic of Iran:
a)
Where a resident of the Islamic Republic of Iran derives income, which, in accordance
with the provisions of this Agreement, may be taxed in India, the Islamic Republic of Iran shall
allow as a deduction from the tax on the income of that resident, an amount equal to the income tax
paid in India.
Such deduction shall not, however, exceed that portion of the tax, as computed before the
deduction is given, which is attributable, to that income which may be taxed in India.
b)
Where, in accordance with any provision of the Agreement income derived by a resident
of the Islamic Republic of Iran is exempt from tax in India, the Islamic Republic of Iran may,
notwithstanding the exemption, in calculating the amount of tax on the remaining income of such
resident, take into account the exempted income.
2.
In the case of India:
a)
Where a resident of India derives income which, in accordance with the provisions of this
Agreement, may be taxed in the Islamic Republic of Iran, India shall allow as a deduction from the
tax on the income of that resident, an amount equal to the tax paid in the Islamic Republic of Iran.
Such deduction shall not, however, exceed that portion of the tax as computed before the deduction
is given, which is attributable, to the income which may be taxed in the Islamic Republic of Iran.
b)
Where in accordance with any provision of the Agreement, income derived by a resident
of India is exempt from tax in India, India may nevertheless, in calculating the amount of tax on
the remaining income of such resident, take into account the exempted income.
Article 25
NON-DISCRIMINATION
1.
Nationals of a Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith which is other or more burdensome than the taxation and
connected requirements to which nationals of that other State in the same circumstances, in particular with
respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of
Article 1, also apply to persons who are not residents of one or both of the Contracting States.
2.
The taxation on a permanent establishment, which an enterprise of a Contracting State has in the
other Contracting State, shall not be less favorably levied in that other State than the taxation levied on
enterprises of that other State carrying on the same activities. This provision shall not be construed as
obliging a Contracting State to grant to residents of the other Contracting State any personal allowances,
reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it
grants to its own residents.
3.
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled,
directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the
first-mentioned State to any taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which other similar enterprises of the first-
mentioned State are or may be subjected.
4.
Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, paragraph 6 of
Article 12 or paragraph 6 of Article 13 apply, interest, royalties and other disbursements paid by an
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THE GAZETTE OF INDIA : EXTRAORDINARY
[PART II—SEC. 3(ii)]
enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of
determining the taxable profits of such enterprise, be deductible under the same conditions as if they had
been paid to a resident of the first-mentioned State.
5.
The provisions of this Article shall apply to taxes covered by this Agreement.
Article 26
MUTUAL AGREEMENT PROCEDURE
1.
Where a person considers that the actions of one or both of the Contracting States result or will
result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of
the remedies provided by the domestic law of those States, present his case to the competent authority of
the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 25 to that
of the Contracting State of which he is a national. The case must be presented within three years from the
first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.
2.
The competent authority shall endeavor, if the objection appears to it to be justified and if it is not
itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent
authority of the other Contracting State, with a view to the avoidance of taxation which is not in
accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time
limits in the domestic law of the Contracting States.
3.
The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement
any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also
consult together for the elimination of double taxation in cases not provided for in the Agreement.
4.
The competent authorities of the Contracting States may communicate with each other directly for
the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities,
through consultations, shall develop appropriate procedures, conditions, methods and techniques for the
implementation of the mutual agreement procedure provided for in this Article.
Article 27
EXCHANGE OF INFORMATION
1.
The competent authorities of the Contracting States shall exchange such information including
documents, or certified copies of documents as is foreseeably relevant for carrying out the provisions of
this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every
kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local
authorities, insofar as the taxation thereunder is not contrary to the Agreement. The exchange of
information is not restricted by Articles 1 and 2.
2.
Any information received under paragraph 1 of this Article by a Contracting State shall be treated
as secret in the same manner as information obtained under the domestic laws of that State and shall be
disclosed only to persons or authorities (including courts and administrative bodies) concerned with the
assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in
relation to the taxes referred to in paragraph 1 of this Article, or the oversight of the above. Such persons
or authorities shall use the information only for such purposes. They may disclose the information in public
court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a
Contracting State may be used for other purposes when such information may be used for such other
purposes under the laws of both States and the competent authority of the supplying State authorizes such
use.
3.
In no case shall the provisions of paragraphs 1 and 2 of this Article be construed so as to impose on
a Contracting State the obligation:
a)
to carry out administrative measures at variance with the laws and the administrative
practice of that or of the other Contracting State;
b)
to supply information which is not obtainable under the laws or in the normal course of the
administration of that or of the other Contracting State;
[भागII—खण् ड 3(ii)]
भारत का राजपत्र : ऄसाधारण
35
c)
to supply information which would disclose any trade, business, industrial, commercial or
professional secret or trade process, or information, the disclosure of which would be contrary to
public policy (ordre public).
4.
If information is requested by a Contracting State in accordance with this Article, the other
Contracting State shall use its information gathering measures to obtain the requested information, even
though that other State may not need such information for its own tax purposes. The obligation contained
in the preceding sentence is subject to the limitations of paragraph 3 of this Article but in no case shall such
limitations be construed to permit a Contracting State to decline to supply information solely because it has
no domestic interest in such information.
5.
In no case shall the provisions of paragraph 3 of this Article be construed to permit a Contracting
State to decline to supply information solely because the information is held by a bank, other financial
institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership
interests in a person.
Article 28
ENTITLEMENT TO BENEFITS
Notwithstanding the other provisions of this Agreement, a benefit under this Agreement shall not be
granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts
and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or
transaction that resulted directly or indirectly in that benefit, unless it is established that granting that
benefit in these circumstances would be in accordance with the object and purpose of the relevant
provisions of this Agreement.
Article 29
MEMBERS OF DIPLOMATIC MISSIONS AND
CONSULAR POSTS
Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular
posts under the general rules of international law or under the provisions of special agreements.
Article 30
ENTRY INTO FORCE
1.
The Contracting States shall notify each other in writing, through diplomatic channels, of the
completion of the procedures required by the respective laws for the entry into force of this Agreement.
2.
This Agreement shall enter into force on the date of the later of the notifications referred to in
paragraph 1 of this Article.
3.
The provisions of this Agreement shall have effect:
a)
in the Islamic Republic of Iran, in respect of taxes on income arising in any fiscal year
beginning on or after the 1st day of Farvardin (in India corresponding to March 21) next following
the calendar year in which the Agreement enters into force;
b)
in India, in respect of taxes on income arising in any fiscal year beginning on or after the
1st day of April (in the Islamic Republic of Iran corresponding to Farvardin 12) next following the
calendar year in which the Agreement enters into force.
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THE GAZETTE OF INDIA : EXTRAORDINARY
[PART II—SEC. 3(ii)]
Article 31
TERMINATION
This Agreement shall remain in force until it is terminated by a Contracting State. Either Contracting State
may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six
months before the end of any calendar year following the period of five years from the date on which the
Agreement enters into force. In such event, the Agreement shall cease to have effect:
a)
in the Islamic Republic of Iran, in respect of taxes on income arising in any fiscal year
beginning on or after the 1st day of Farvardin (in India corresponding to March 21) next following
the calendar year in which the notice was given;
b)
in India, in respect of taxes on income arising in any fiscal year beginning on or after the
1st day of April (in the Islamic Republic of Iran corresponding to Farvardin 12) next following the
calendar year in which the notice was given.
Done in duplicate at New Delhi on 28/11/1396 solar Hijra corresponding to 17/02/2018 in the Hindi,
Persian and English languages, all texts being equally authentic. In case of any divergence of
interpretation, the English text shall prevail.
IN WITNESS WHEREOF the undersigned, being duly authorized thereto, have signed this Agreement.
For the Government of
the Republic of India
Sd/-
Sushil Chandra
Chairman,
Central Board of Direct Taxes
For the Government of
the Islamic Republic of Iran
Sd/-
Mohammad Khazaee
Deputy Minister of Economic Affairs and Finance
and President of the Organization for Investment,
Economic and Technical Assistance of Iran
PROTOCOL
At the moment of signing of the Agreement between the Islamic Republic of Iran and the Republic
of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income, the undersigned have agreed upon the following provisions which shall form an integral part of the
Agreement:
2.
It is understood that for the purposes of this Agreement:
a)
the term “fiscal year” means:
(i)
in the case of India: the financial year beginning on the first day of April;
(ii)
in the case of Islamic Republic of Iran: the tax year/fiscal year as defined under the
Direct Taxes Act of the Islamic Republic of Iran.
b)
the term "tax" means Indian or Iranian tax, as the context requires, but shall not include
any amount which is payable in respect of any default or omission in relation to the taxes to which
this Agreement applies or which represents a penalty or fine imposed relating to those taxes.
Further, the amounts payable for the aforementioned default, omission, penalty or fine shall not be
taken into account for giving tax credit.
2.
For the purpose of computing the time limit in paragraph 3 (a) of Article 5, the period of 270 days
begins on the date on which the construction activity itself begins. It does not take into account the time
spent solely on preparatory activities such as obtaining permits or licences.
[भागII—खण् ड 3(ii)]
भारत का राजपत्र : ऄसाधारण
37
3.
With reference to paragraph 3 of Article 8 it is understood that:
Profits derived by a transportation enterprise of a Contracting State from the use, maintenance, or rental of
containers (including trailers and other equipment for the transport of containers) used for the transport of
goods or merchandise in international traffic which is supplementary or incidental to its operation of ships
or aircrafts in international traffic, shall be taxable only in that Contracting State unless the containers are
used solely within the other Contracting State.
4.
For the purpose of Article 11, in the case of India, the term Central Bank means “the Reserve Bank
of India”.
5.
With reference to Article 15, it is understood that the Article applies only to a resident who is an
individual.
6.
With reference to paragraph 1 of Article 21, it is understood that:
For the purpose of this Article, an individual shall be deemed to be a resident of a Contracting State if he is
resident in that State in the fiscal year in which he visits the other Contracting State or in the immediately
preceding fiscal year.
7.
With reference to paragraph 2 of Article 25 (Non-discrimination), it is understood that:
This provision shall not be construed as preventing a Contracting State from charging the profits of a
permanent establishment which a company of the other Contracting State has in the first mentioned State at
a rate of tax which is higher than that imposed on the profits of a similar company of the first mentioned
Contracting State, nor as being in conflict with the provisions of paragraph 3 of Article 7. It is also
understood that in no case the taxation of a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall be less favorably levied than the taxation levied on a
permanent establishment of an enterprise of a third State carrying on the same activities under a double
taxation Agreement concluded by the other Contracting State with that third State.
8.
With reference to Article 27 (Exchange of Information), it is understood that:
a)
An exchange of information will only be requested once the requesting Contracting State
has pursued all means available in its own territory to obtain the information, except those that
would give rise to disproportionate difficulties.
b) The requesting State shall provide the following information to the requested State when
making a request for information under Article 27:
(i) the identity, including the name of the person under examination or investigation; as
well as any other particulars facilitating that person‟s identification, such as address, TIN
and National ID No., if available;
(ii) the period of time for which the information is requested;
(iii) a statement of the information sought including its nature and the form, if any, in
which the requesting State wishes to receive the information from the requested State;
(iv) the tax purpose for which the information is sought;
(v) to the extent known, the name, address and other particulars mentioned in clause (i) of
this subparagraph, of any person believed to be in possession of the requested information.
c) The reference to “foreseeable relevance” is intended to provide for exchange of information in
tax matters to the widest possible extent and, at the same time, to clarify that the Contracting States
are not at liberty to engage in “fishing expeditions” or to request information that is unlikely to be
relevant to the tax affairs of a given taxpayer.
d) Automatic or spontaneous exchange of information may be applicable upon the conclusion of an
implementation agreement between the competent authorities of both Contracting States.
e) In cases where the exchange of information entails costs exceeding the usual administrative
practice costs of the requested State, the requesting State will bear the excessive costs, as may be
mutually agreed upon between the competent authorities of the Contracting States.
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THE GAZETTE OF INDIA : EXTRAORDINARY
[PART II—SEC. 3(ii)]
f) The requested State shall be required to ensure that the data to be supplied is accurate. If it
emerges that inaccurate data has been supplied, the requesting State shall be informed of this
without delay. That State shall be required to correct such data without delay.
g) The requested and the requesting States shall be required to take effective measures to protect
the information supplied against unauthorised access, alteration and disclosure.
9.
It is understood that when Iran introduces a provision in its domestic law regarding assistance in
collection of taxes to other treaty partners or agrees to extend such assistance to any other treaty partner,
then the competent authorities of the two Contracting States shall by mutual agreement settle the mode of
application for extending assistance in the collection of taxes to each other.
10.
As far as the entitlement to benefits of the Agreement is concerned, it is understood that the
provisions of this Agreement shall in no case prevent a Contracting State from the application of the
provisions of its domestic law and measures concerning tax avoidance or evasion.
Done in duplicate at New Delhi on 28/11/1396 solar Hijra corresponding to 17/02/2018 in the Hindi,
Persian and English languages, all texts being equally authentic. In case of any divergence of
interpretation, the English text shall prevail.
IN WITNESS WHEREOF the undersigned, being duly authorized thereto, have signed this Protocol.
For the Government of
the Republic of India
Sd/-
Sushil Chandra
Chairman,
Central Board of Direct Taxes
For the Government of
the Islamic Republic of Iran
Sd/-
Mohammad Khazaee
Deputy Minister of Economic Affairs and Finance
and President of the Organization for Investment,
Economic and Technical Assistance of Iran
[Notification No.29/2021/F.No.501/03/92-FTD-II]
RAJESH KUMAR BHOOT, Jt. Secy.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.
