Double Tax Avoidance Agreement (DTAA) Between India and Oman

The India and Oman Double Taxation Avoidance Agreement (DTAA) ensures that persons and businesses, resident in India, Oman, or both and having income from the contracting country do not pay tax twice. It allows the persons to claim credit for taxes paid in the contracting country, thus avoiding double taxation. 

In this article. We will learn about the DTAA between India and Oman and the applicability of tax rates as specified in the treaty. 

India-Oman DTAA Update

The DTAA between India and Oman was revised as Oman decided to levy personal income tax at the rate of 5% for persons earning more than OMR 42,000. This will be effective from January 2028. Further, the tax rate on royalties and technical fees was reduced to 10% from 15% with effect from 28th May 2025. 

What is the DTAA Between India and Oman?

The DTAA between the Government of India and the Sultanate of Oman was signed on 2nd April 1997. It is an agreement to avoid double taxation and prevent tax evasion in both countries. Various articles of the agreement specify the taxation rules for particular income sources. Both countries are responsible for maintaining the provisions of the DTAA. 

The agreement applies to the entire of India and Oman, i.e., to a person who is a resident of one or both countries. 

Importance of the DTAA Between India and Oman

The DTAA between India and Oman helps boost trade and investments by preventing double taxation on the same income. A stable and predictable tax environment is created, thus making it easier and less costly for businesses and individuals to operate across both countries. Offering tax reliefs through credits or exemptions encourages cross-border economic activity, supports job creation, and strengthens cooperation between the two nations.

Taxes Covered Under DTAA

The DTAA between India and Oman cover the following array of taxes:

In India

• Income Tax (including surcharge)

In Oman

• The Company Income Tax
• The Profit Tax on Commercial and Industrial Establishments (Omani Tax)

The agreement shall also apply to any similar or identical taxes imposed by either country after the signing of the agreement.    

India and Oman DTAA Tax Rates

The DTAA between India and Oman specifies the following rates of tax for different sources of income:

• Dividends: 12.5%
• Interest: 10%
• Royalties: 10%
• Technical Fees: 10%

Tax on Capital Gains Under India-Oman DTAA

The DTAA between India and Oman states the following for tax on capital gains:

• Any capital gain arising to a resident of one of the contracting countries (India and Oman) due to the transfer of an immovable property (situated in the other country) can be taxed in the country where the property was located. 
•  Gains from the transfer of a business property of a permanent establishment of either of the contracting countries located in the other state may be taxed in the country where such property was located.
• Gains arising due to the transfer of shares in a company can be taxed in the country where such company is a resident. 
• Gains due to a ship or aircraft transfer can only be taxed by the country where the transferor is a resident. 
• Gains due to the transfer of any other property will be taxed only in the country where the transferor is a resident. 

Tax on Income From Immovable Property

The income derived by a resident of one of the contracting countries, through an immovable property situated in the other country, can be taxed in the country where such property is situated. 

For example, Mr. A, a resident of Oman, has a property in New Delhi, India. He earns an annual income of USD 10,000 from that property. In this case, the UDS 10,000 income can be taxed in India (where the property is situated) and Oman (where the person is resident).

Tax on Business Profits 

The profits derived by a business resident of one of the contracting countries will be taxed only in such country of residence. However, if such a business has a permanent establishment in the other contracting country, then the profits from such establishments may be taxed in the other country, 

For example, ABC Ltd. is an Indian company that has a permanent establishment in Oman. The total profit for the year was USD 100,000, out of which USD 30,000 was from the Omani establishment. USD 30,000 earned by the Omani establishment can be taxed in both in Oman and India. However, the remaining USD 70,000 will be taxed only in India.

Conclusion

The India and Oman DTAA aims to avoid double taxation of income thus creating an environment favourable for cross-border trade and investment. As global economies become more interconnected, agreements like this play a crucial role in driving international trade, investment, and overall economic growth between the two countries.

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