For cross-border business, Section 90(2) is your most powerful tool. It allows a taxpayer to be governed by the provisions of the Indian Income-tax Act or the Double Taxation Avoidance Agreement (DTAA), whichever is more beneficial.
Why the Treaty often wins:
In 2026, domestic tax rates on “passive income” (Dividends, Royalties, Interest) are generally pegged at 20%. However, most DTAAs (like those with Singapore, Mauritius, or the USA) cap these rates at 10% to 15%.
| Nature of Income | Domestic Act Rate | DTAA Rate (Average) | Benefit |
| Dividends | 20% | 5% – 15% | Lower Withholding |
| Royalty / FTS | 20% | 10% | 10% Savings |
| Interest | 20% | 10% – 15% | Cost-efficient Debt |
The Compliance Trigger: To claim these lower rates, you must obtain a Tax Residency Certificate (TRC) from your home country and electronically file Form 10F on the Indian tax portal. Without these, the tax department may default you to the higher domestic rates.