The new tax treaty between India and Sri Lanka became effective April 1st, 2014. The treaty was signed in January 2013 and replaced the previous treaty signed in 1982. The treaty includes the following withholding rates:
- Dividends - 7.5%
- Interest - 10%
- Royalties - 10%
India does not impose withholding tax on dividends. Note, however, that an Indian company paying dividends is subject to a 15% distribution tax, as well as a 10% surcharge and 3% cess (levy). These taxes are not limited by tax tr…