Article 23 Elimination of double taxation

The Netherlands, when imposing tax on its residents, may include in the basis upon which such taxes are imposed the items of income of capital which, according to the provisions of this Convention, may be taxed in India.

However, where a resident of the Netherlands derives items of income or owns items of capital which according to Article 6, Article 7, paragraph 6 of Article 10, paragraph 7 of Article 11, paragraph 7 of Article 12, paragraphs 1, 2, 4 and 5 of Article 13, Article 14, paragraph 1 of Article 15, Article 16, paragraph 3 of Article 18, Article 19 and paragraphs 1 and 2 of Article 22 of this Convention may be taxed in India and are included in the basis referred to in paragraph 1, the Netherlands shall exempt such items of income of capital by allowing a reduction of its tax. This reduction shall be computed in conformity with the provisions of Netherlands law for the avoidance of double taxation. For that purpose the said items of income or capital shall be deemed to be included in the total amount of the items of income or capital which are exempt from Netherlands tax under those provisions.

Further, the Netherlands shall allow a deduction from the Netherlands tax so computed for the items of income which according to paragraph 2 of Article 8A, paragraph 2 of Article 10, paragraph 2 of Article 11, paragraph 2 of Article 12, Article 17 and paragraph 2 of Article 18 of this Convention may be taxed in India to the extent that there items are included in the basis referred to in paragraph 1. The amount of this deduction shall be equal to the tax paid in India on these items of income, but shall not exceed the amount of the reduction which would be allowed if the items of income so included were the sole items of income which are exempt from Netherlands tax under the provisions of Netherlands law for the avoidance of double taxation.

Where, by reason of special relief given under the provisions of Indian law for the purpose of encouraging investment in India, the Indian tax actually levied on interest arising in India is lower than the tax India may levy according to sub-paragraphs a) and b) of paragraph 2 of Article 11, then the amount of the tax paid in India on such interest shall be deemed to have been paid at the rates of tax mentioned in the said provisions.

However, if the general tax rates under Indian law applicable to the afore-mentioned interest are reduced below those mentioned in the foregoing sentence these lower rates shall apply for the purposes to that sentence.

The provisions of the two foregoing sentences shall only apply for a period of ten years after the date on which the Convention became effective. This period may be extended by mutual agreement between the competent authorities.

In India double taxation shall be eliminated as follows:

Where a resident of India derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in the Netherlands, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in the Netherlands, whether directly or by deduction; and as a deduction from the tax on the capital of that resident an amount equal to the capital tax paid in the Netherlands. Such deduction in either case shall not, however, exceed that part of the income tax or capital tax (as computed before the deduction is given) which is attributable, as the case may be, to the income or the capital which may be taxed in the Netherlands. Further, where such resident is a company by which surtax is payable in India, the deduction in respect of income tax paid in the Netherlands shall be allowed in the first instance from income tax payable by the company in India and as to the balance, if any, from surtax payable by it in India.

Provided that income which in accordance with the provisions of this Convention is not to be subjected to tax may be taken into account in calculating the rate of tax to be imposed.

For the purposes of this paragraph in determining the taxes on income paid to the Netherlands, the investment premiums and bonuses and desinvestment payments as meant in the Netherlands Investment Account Law (‘Wet investeringsrekening’) shall not be taken into account. For the purposes of this paragraph, the taxes referred to in paragraphs 3a) and 4 of Article 2, other than the capital tax, shall be considered taxes on income.

Where a resident of one of the States derives gains which may be taxed in the other State in accordance with paragraph 6 of Article 13, that other State shall allow a deduction from its tax on such gains to an amount equal to the tax levied in the first-mentioned State on the said gains.