India Qatar DTAA Revised was signed on February 18, 2025, came into force on September 10, 2025, and shall apply to income earned from April 1, 2026, onwards in both India and Qatar.
Here’s a quick breakdown of the key changes and what they mean:
- Anti-abuse safeguard (Principal Purpose Test):
The tax benefits can now be denied if obtaining the treaty benefits was one of the principal purposes of a transaction or arrangement. This seeks to prevent artificial structures designed solely for tax avoidance.
- Dual residency “tie-breaker” rule:
If a company or entity is a resident in both India and Qatar, the tax authorities of both sides will first try to decide on residency by mutual agreement. If they fail, the said entity shall not be entitled to the benefits of the treaty.
- Revised “Permanent Establishment” (PE) definition:
A service PE will now arise only if services are provided in the other country for more than 90 days within any 12-month period — tightening the earlier criteria.
- Expense deduction restrictions for Permanent Establishments:
A PE shall not deduct expenses, such as interest, royalties, and similar payments, concerning its head office, except for reimbursable costs actually incurred.
- Broader definition of “interest”:
The term now also include income from those Islamic finance instruments that are economically similar to loans.
- Capital gains taxation:
The country of location of the immovable property will have a taxing right on the capital gain that arises from the sale of shares if more than 50% of the share value is derived from such property.
- Exemption for sovereign entities:
Dividends paid to sovereign funds or government-owned entities will be taxable only in their country of residence, thus encouraging smoother cross-border investment flows.
- Student and apprentice benefits revised:
The earlier monetary exemption limit is gone. Instead, students and apprentices now get an exemption on employment income for up to six years.
- Stronger information exchange and cooperation:
Both countries have agreed to an enhanced sharing of financial and tax information, as well as mutual assistance in tax collection, to bring about more transparency and compliance.
