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India-Bahrain DTAA

Treaty signed: April 9, 2004  |  Effective from: August 11, 2005

Dividends

0%

Interest

0%

Royalties

N/A (not covered)

Capital Gains

Residence-based

Fees for Technical Services

N/A

NRI / Practical Note: Bahrain-resident NRIs benefit from India not taxing capital gains on Indian shares (the treaty's capital gains article gives exclusive taxing right to Bahrain, which has no capital gains tax). This makes Bahrain technically the best-treaty jurisdiction for NRIs investing in Indian equity - though SEBI KYC requirements and anti-avoidance provisions may apply.

Key Treaty Provisions

  • Bahrain does not impose personal income tax - the treaty is primarily about preventing India from taxing Bahrain-source income of Indian residents
  • Zero withholding on dividends and interest - most favourable among India's Gulf treaties
  • Capital gains on Indian shares: residence-based - Bahrain residents are NOT taxed in India on gains from Indian shares (unusual provision)
  • However, gains on Indian immovable property remain taxable in India
  • Very limited treaty - does not cover royalties or FTS (domestic law applies)

Frequently Asked Questions

Is capital gains on Indian stocks zero for Bahrain-resident NRIs?▾

Technically, the India-Bahrain DTAA gives exclusive taxing right on capital gains to Bahrain (the country of residence). Since Bahrain has no capital gains tax, the effective rate is zero. However, this applies to the treaty provision on capital gains from movable property (shares). Indian real estate capital gains remain taxable in India.

What is the TDS rate on NRO interest income for a Bahrain-resident NRI?▾

The India-Bahrain DTAA specifies 0% withholding on interest. However, Indian banks may still apply standard TDS and you would need to claim a refund or apply for a lower/nil withholding certificate by proving Bahrain residency. Operationally, submit TRC and Form 10F to your bank.

Does India tax Bahrain company profits on Indian operations?▾

Only if the Bahrain company has a Permanent Establishment in India. Business profits attributable to an Indian PE are taxable in India. Without a PE, business profits are taxable only in Bahrain (which has no corporate tax for most entities).

Other India DTAA Treaties

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View all 91 treaties →
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