India-UAE DTAA Has No FTS Clause | RebaseNest

✍️ RebaseNest Team · Last updated 8 Jun 2026

·9 min read
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Educational only. Not investment, tax, legal, or immigration advice. RebaseNest is not a registered investment adviser under SEBI, SEC, or FCA. Indian tax, FEMA, and DTAA rules change frequently — verify every threshold and citation with a qualified cross-border CA before acting. Full disclaimer.

Most India treaties carry a Fees for Technical Services (FTS) article. The India-US treaty has Article 12 (Royalties and Fees for Included Services). The India-UK treaty has Article 13. The OECD model itself has none, but India typically negotiates one in. The India-UAE Double Taxation Avoidance Agreement, signed at New Delhi on 29 April 1992, is the well-known exception. That single missing article changes how cross-border consultancy and technical-service payments are characterised between the two countries, and it has become a recurring theme at the Income Tax Appellate Tribunal.

For an NRI or returnee with a UAE business that invoices Indian clients, or for an Indian payer remitting consultancy fees to a UAE consultant, the structure is worth understanding from the primary sources rather than from secondary commentary.

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

On cross-border services, the treaty stops at Article 5 (Permanent Establishment), Article 7 (Business Profits), and Article 14 (Independent Personal Services). There is no separate article allocating taxing rights over Fees for Technical Services or for Included Services. The Income-tax Department publishes the treaty text in the DTAA section of its portal.

Article 4   Resident
Article 5   Permanent Establishment
Article 7   Business Profits
Article 12  Royalties (royalties only, no FTS)
Article 14  Independent Personal Services

When the treaty does not deal with a specific income head, Article 7 generally governs UAE enterprise receipts not specifically covered elsewhere. Article 14 governs income derived by an individual UAE resident from professional services or other independent activities of a similar character. That is the structural reason consultancy receipts end up in Article 7 or Article 14 between India and the UAE, depending on whether the recipient is an enterprise or an individual.

2. What "no FTS article" actually does

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, plus the applicable surcharge and cess. The headline FTS rate under Section 115A is the figure currently in force as amended from time to time by the Finance Act, and should be read in the version applicable to the assessment year in question.

Section 90(2) of the Income-tax Act allows a non-resident to choose the treaty position if it is more beneficial. With no FTS article in the India-UAE DTAA, the more beneficial position for a UAE enterprise providing technical services to an Indian client is to characterise the receipt as business profits under Article 7, where Article 7(1) makes those profits taxable in India only to the extent attributable to a Permanent Establishment in India. For an individual UAE resident providing professional services, Article 14 applies on its own terms.

Plain reading: domestic FTS treatment applies if the UAE resident does not invoke the treaty. The moment the treaty is invoked with a valid Tax Residency Certificate and Form 10F particulars, the analysis shifts to Article 7 plus Article 5 for an enterprise, or to Article 14 for an individual. No PE in India for a UAE enterprise, and no Indian tax under Article 7.

3. Permanent Establishment under Article 5 — what counts

The standard PE tests apply. A fixed place of business through which the UAE enterprise carries on business in India is a PE. A building site, construction, assembly or installation project, or supervisory activity connected with it, is a PE only if it lasts more than nine months under Article 5(2)(h) of the treaty. A dependent agent who habitually concludes contracts on behalf of the UAE enterprise in India is a PE.

The service PE limb is where Indian assessments most often land. Article 5(2)(i) treats the furnishing of services, including consultancy services, by a UAE enterprise through employees or other personnel in India as a PE only if such activities continue within India for a period or periods aggregating more than nine months within any twelve-month period on the same or a connected project. That nine-month rule is what the assessing officer and the tribunal will run.

A short list of where service-PE risk crystallises:

On-site project work in India by UAE-payroll engineers
Long secondment of UAE staff to an Indian customer
Repeated short visits aggregating above the 9-month rule in 12 months
A UAE 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." The fact pattern controls.

4. What the ITAT has said

Indian Income Tax Appellate Tribunal benches have addressed the India-UAE no-FTS point in several published orders. The recurring holding is that, in the absence of an FTS article in the treaty, consultancy and technical-service receipts of a UAE enterprise must be tested under Article 7, which requires attribution to a Permanent Establishment in India for Indian tax to apply. ITAT orders are searchable on the official ITAT website, which carries the judicial database and order search.

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

The Assessing Officer often defaults to domestic FTS under Section 9(1)(vii) and Section 115A
The taxpayer then has to put the treaty on record with TRC + Form 10F and a clean no-PE record

A favourable ITAT order in another taxpayer's matter is persuasive, not binding on a different set of facts. The Department can and does litigate at the High Court level. 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 UAE consultant must consider Section 195 of the Income-tax Act, 1961, 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 from the UAE Ministry of Finance and Form 10F particulars under Rule 21AB are mandatory inputs into the assessment of chargeability. Without them, the Department can disregard the treaty claim and demand domestic FTS withholding at the Section 115A rate. The authorised dealer bank also asks for the Form 15CA acknowledgement number 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 "UAE resident" qualifier in Article 4 of the treaty is the gate to Article 7 or Article 14. A person who has just moved to the UAE but has not yet obtained a UAE 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 the UAE is no longer a UAE 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. The right sequence is: domestic residency status under Section 6, then treaty residence under Article 4 if both countries claim residence, then the operative income article. Skipping straight to "Article 7, no FTS, 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-UAE consultancy arrangement:

Is the UAE entity a "resident" of the UAE under Article 4 of the treaty for the relevant year
Is the TRC issued by the UAE Ministry of Finance 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, 9-month construction or service, agent)
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 will hold up on assessment, more than the headline that "UAE has no FTS clause."

A note on what this is. This article is one returnee's working notes, 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 checklist of questions to take to that conversation, not as the answer.

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