India-Thailand DTAA Has No FTS Article | RebaseNest

Many Indian treaties do carry a Fees for Technical Services article — for example, India-US Article 12 and India-UK Article 13 — but not all of them. The India-UAE DTAA has no FTS article, and the absence has been litigated for years. The India-Thailand DTAA sits in the same structural camp, and the Income Tax Appellate Tribunal has recently revisited the question of how technical-service receipts of a Thai resident are allocated between the two states when the treaty itself is silent on FTS.

The recent answer is more nuanced than the easy reading. The default "no FTS article therefore Article 22 Other Income" route has been rejected for business-related FTS. The current path runs through Article 7 read with the Permanent Establishment test. For NRIs and returnees with a Thailand-based consultancy or service company invoicing Indian clients, or for an Indian payer remitting consultancy fees to a Thai consultant, the structure is worth reading from the primary sources rather than from secondary commentary.

1. What is and is not in the India-Thailand DTAA

The operative India-Thailand treaty as published by the Income-tax Department covers the standard heads. There is an Article 5 defining Permanent Establishment, an Article 7 allocating business profits, an Article 12 for royalties, an Article 14 for independent personal services, and an Article 22 for items of income not dealt with in any other article. What it does not contain is a separate article allocating taxing rights over Fees for Technical Services or for any equivalent included services category.

Article 4   Resident
Article 5   Permanent Establishment
Article 7   Business Profits
Article 12  Royalties (no FTS clause attached)
Article 14  Independent Personal Services
Article 22  Other Income (residual)

Article 22(3) in the operative treaty contains a "may also be taxed in that other State" formulation, which on its face allocates a concurrent source-state taxing right over items of income not dealt with elsewhere. The intuitive reading — "no FTS article, so push FTS into Article 22" — has been the Department's preferred line in assessments. The tribunal has had to decide whether that move is correct in the first place.

2. Why the Article 22 default has been rejected for business-related FTS

In East West Seeds India Pvt Ltd v. ACIT (ITAT Pune, ITA Nos. 833, 857 and 858/PUN/2025, decided 19 December 2025), the tribunal addressed precisely this question for payments made to a Thai recipient for technical and consultancy services. The order records that FTS cannot be slotted into Article 22 of the India-Thailand DTAA merely because the treaty has no specific FTS article. Where the receipt arises in the ordinary course of business of the Thai enterprise, the proper article is Article 7 (Business Profits), read with Article 5 (Permanent Establishment).

The tribunal relied on Bangkok Glass Industry Co. Ltd. v. ACIT, decided by the Madras High Court, and on Denso (Thailand) Co. Ltd. v. ACIT, decided by the Delhi ITAT, for the same proposition. The combined authority is that the absence of an FTS article in the India-Thailand DTAA does not by itself produce a free-fall into Article 22. The structural choice runs through whether the receipt is part of the enterprise's regular business, and whether a Permanent Establishment in India exists.

Plain reading: under Indian domestic law, a payment to a non-resident for technical, managerial, or consultancy services is Fees for Technical Services under Explanation 2 to Section 9(1)(vii) of the Income-tax Act, 1961, and is deemed to accrue or arise in India. Section 115A then prescribes the gross-basis tax rate for non-resident FTS, in the version as amended by the Finance Act applicable to the relevant assessment year, plus surcharge and cess. Section 90(2) of the Income-tax Act allows the non-resident to choose the treaty position if it is more beneficial. For a Thai resident, the more beneficial reading is Article 7 plus Article 5 — and East West Seeds confirms that this is the correct structural reading for business-related FTS, not Article 22.

3. Permanent Establishment under Article 5 — what counts

The standard PE tests apply. A fixed place of business through which the Thai enterprise carries on business in India is a PE. A dependent agent who habitually concludes contracts on behalf of the Thai enterprise in India is a PE. Construction, installation, assembly and supervisory projects trigger a PE only after they cross the threshold specified in Article 5 of the operative treaty. The service PE limb treats the furnishing of services by a Thai enterprise through employees or other personnel in India as a PE only if the activities continue beyond the threshold specified in Article 5(2) of the operative treaty.

A short list of where service-PE risk crystallises for a Thai enterprise dealing with Indian clients:

On-site project work in India by Thailand-payroll engineers
Long secondment of Thai staff to an Indian customer
Repeated short visits that aggregate above the Article 5(2) threshold in a 12-month period
A Thai consultancy with an India-based agent closing deals

Each of these can flip the answer from "Article 7, no Indian tax" to "Article 7, profits attributable to PE taxed in India." Once a PE is established, the profits attributable to the PE are taxable in India under Article 7, regardless of whether the receipt would have been called FTS under domestic law.

4. What the ITAT and the courts have actually said

The pattern in the published authority on the India-Thailand DTAA is that the Department initially defaults to domestic FTS treatment under Section 9(1)(vii) and Section 115A at the assessment stage, and the taxpayer then has to put the treaty position on record with a Tax Residency Certificate and Form 10F particulars. Where the matter reaches the tribunal, the tribunal has — in East West Seeds (2025), Bangkok Glass (Madras HC) and Denso (Thailand) (Delhi ITAT) — rejected the Department's attempt to invoke Article 22 by default and has instead held that Article 7 read with Article 5 controls for business-related receipts.

Two practical observations from how these matters tend to be decided:

The AO often defaults to domestic FTS under Section 9(1)(vii) and Section 115A
The taxpayer carries the burden of establishing the treaty position with TRC + Form 10F

A favourable tribunal or High Court order in another taxpayer's matter is persuasive, not binding on a different fact pattern. The Department can and does litigate further. Treaty positions are not self-executing — paperwork and contemporaneous evidence of no PE are what carry the position through assessment.

5. Section 195 mechanics on the Indian payer side

The Indian payer remitting to a Thai consultant must consider Section 195 of the Income-tax Act, which requires tax deduction at source on any sum chargeable under the Act paid to a non-resident. The chargeability question is decided by reading the Act together with the applicable DTAA through Section 90(2). The mechanics break down as follows.

Section 195(1)   Payer's TDS obligation on chargeable sums
Section 195(2)   Payer can apply to the AO if uncertain about chargeability/rate
Section 197      Payee can apply for a lower or NIL deduction certificate
Rule 37BB        Form 15CA (by payer) and Form 15CB (by CA) at remittance

For claiming treaty relief specifically, a Tax Residency Certificate issued by the Thai tax authority is required under Section 90(4) of the Income-tax Act, and the prescribed additional information — including Form 10F — is required under Section 90(5) read with Rule 21AB of the Income-tax Rules. Without these inputs the Department can disregard the treaty claim and demand domestic FTS withholding at the Section 115A rate in force under the Finance Act for the relevant assessment year. The authorised dealer bank also asks for the Form 15CA acknowledgement at the remittance stage. Whether Form 15CB is required at all depends on the nature and amount of the remittance under Rule 37BB.

6. Where this breaks for returnees and dual-status persons

The "Thai resident" qualifier in Article 4 of the treaty is the gate to any operative income article. A person who has just moved to Thailand but has not yet obtained a Thai TRC, or who is still tax-resident in India under Section 6 of the Income-tax Act, cannot assume treaty relief without first resolving treaty residence under Article 4. Equally, a person who has returned to India from Thailand is no longer a Thai resident under Article 4 and cannot use the treaty position for India-source consultancy income earned post-return.

For the year-of-move, the residency picture is messy and the treaty tie-breaker in Article 4 applies. A typical legal analysis sequence is: domestic residency status under Section 6 of the Income-tax Act, then treaty residence under Article 4 if both countries claim residence, then the operative income article. Skipping straight to "no FTS article, no tax" without first nailing down treaty residence is a common error in the planning conversation.

7. Key factual checks that usually determine the outcome

Common factual checks that decide whether the no-FTS reading holds in any India-Thailand consultancy arrangement:

Is the Thai entity a "resident" of Thailand under Article 4 for the relevant year
Is the TRC issued by the Thai tax authority for the right period
Are Form 10F particulars filed electronically on the Income-tax e-filing portal
Does the engagement create any PE risk under Article 5 (fixed place, project, agent, service PE)
Is the receipt part of the Thai enterprise's regular business (Article 7 route) or a separate stream
Has the Department invoked Article 22 — and is the Article 7 / Article 5 counter-position documented
What withholding position has been documented on Form 15CA and, where required, Form 15CB
Has the arrangement been stress-tested against the General Anti-Avoidance Rule

These factors usually determine whether the treaty position holds up on assessment, more than the headline that "the India-Thailand DTAA has no FTS clause." The East West Seeds line — that business-related FTS goes to Article 7, not Article 22 — is the operative answer in 2026, but the underlying facts on PE and on the character of the receipt are what carry the position through.

A note on what this is. This article is a general explainer, not personalised advice. Numbers age. Rules change. The only person who can sign off on your specific case is a qualified cross-border chartered accountant looking at your full facts. Use this as a starting point for that conversation, not as the answer.

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Sources:

• Income-tax Act, 1961 (full text PDF, IndiaCode): https://www.indiacode.nic.in/bitstream/123456789/2435/1/a1961-43.pdf — Sections 5, 6, 9(1)(vii), 90(2), 90(4), 90(5), 115A, 195, 197.
• Income-tax Rules, 1962 — Rule 21AB (TRC / Form 10F prescribed information) and Rule 37BB (Form 15CA / 15CB at remittance). Published by the Income-tax Department in the Rules section of its portal.
• Income-tax Department main portal (forms, DTAA index, e-filing entry): https://www.incometax.gov.in/iec/foportal/
• Income-tax Department e-filing portal (TRC, Form 10F, Form 15CA / 15CB electronic filing): https://eportal.incometax.gov.in/
• Income Tax Appellate Tribunal (ITAT) — judicial database and order search: https://itat.gov.in/ — covering East West Seeds India Pvt Ltd v. ACIT (ITAT Pune, ITA Nos. 833, 857 and 858/PUN/2025, decided 19 December 2025), Bangkok Glass Industry Co. Ltd. v. ACIT (Madras High Court), and Denso (Thailand) Co. Ltd. v. ACIT (Delhi ITAT).
• India-Thailand DTAA — revised agreement signed at New Delhi on 29 June 2015, entered into force on 13 October 2015, effective in India for fiscal years beginning on or after 1 April 2016. India notification: No. 88/2015, S.O. 3244(E). Treaty text published in the DTAA section of the Income-tax Department portal.
• Reserve Bank of India Master Direction on Deposits and Accounts of Non-Residents (FED MD 14/2015-16): https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198