India - Interest

Article 11. Interest

1. Interest arising in one of the States and paid to a resident of the other State may be taxed in that other State.

2. How ever such interest may also be taxed in the State in which it arises and according to the laws of that State, but if the recipient
is the beneficial owner of the interest the tax so charged shall not exceed:

a 10 percent of the gross amount of the interest on loans made or guaranteed by a bank or other financial institution carrying on
bona fide banking or financing business or by an enterprise which holds directly or indirectly at least 10 per cent of the capital of the
company paying the interest:

b 15 per cent of the gross amount of the interest in all other cases.

3. Notwithstanding the provisions of paragraph 2:

a the Government of one of the States shall be exempt from tax in the other State in respect of interest derived directly or indirectly
by that Government from that other State,

b interest arising in one of the States and paid in respect of a loan guaranteed or insured by the Government of the other State shall
be exempt from tax in the first-mentioned State.

4. For the purposes of paragraph 3 the term "Government" means:

a in the case of the Netherlands, the Government of the Kingdom of the Netherlands and shall include:
– the local authorities;
– the Nederlandsche Bank (Central Bank);
– such institutions, the capital of which is wholly owned by the Government of the Kingdom of the Netherlands or the local
authorities.
– the Nederlandse Financierings Maatschappij voor Ontwikkelingslanden N.V. (Netherlands finance company for developing
countries) and the Nederlandse Investeringsbank voor Ontwikkelingslanden N.V. (Netherlands investment bank for developing
countries);
– all other institutions as may be agreed from time to time between the competent authorities of the States;

b in the case of India, the Government of India and shall include:
– a political subdivision;
– a local authority;
– the Reserve Bank of India (Central Bank);
– the Export-Import Bank of India;
– such institutions, the capital of which is wholly owned by the Government of India or a political subdivision or a local authority;
– all other institutions as may be agreed from time to time between the competent authorities of the States.

5. The competent authorities of the States shall by mutual agreement settle the mode of application of paragraph 2.

6. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, but
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.

7. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, being a resident of one of the
States, carries on business in the other 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 14, as the case may be, shall apply.

8. Interest shall be deemed to arise in one of the States when the payer is that State itself, a political subdivision, a local authority or
a resident of that State. Where, however, the person paying the interest, whether he is a resident of one of the States or not, has in
one of the States 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.

9. 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 State,
due regard being had to the other provisions of this Convention.

Protocol:

IV. Ad Articles 10, 11 and 12

1. Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12,
applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the
tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

2. If after the signature of this Convention under any Convention or Agreement between India and a third State which is a member
of the OECD India should limit its taxation at source on dividends, interest, royalties, fees for technical services or payments for the
use of equipment to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items
of income, then, as from the date on which the relevant India Convention or Agreement enters into force the same rate or scope as
provided for in that Convention or Agreement on the said items of income shall also apply under this Convention.