ARTICLE 14
Permanent Establishment Tax
1. A company which is a resident of India may be subject in
the United States to a tax in addition to the tax allowable under
the other provisions of this Convention.
a) Such tax, however, may be imposed only on:
i) the portion of the business profits of the
company subject to tax in the United States which
represents the dividend equivalent amount; and
ii) the excess, if any, of interest deductible in
the United States in computing the profits of the
company that are subject to tax in the United States and
either attributable to a permanent establishment in the
United States or subject to tax in the United States
under Article 6 (Income From Immovable Property (Real
Property)), Article 12 (Royalties and Fees for Included
Services) as fees for included services, or Article 13
(Gains) of this Convention over the interest paid by or
from the permanent establishment or trade or business in
the United States.
b) For purposes of this article, business profits means
profits that are effectively connected (or treated as
effectively connected) with the conduct of a trade or
business within the United States and are either attributable
to a permanent establishment in the United States or subject
to tax in the United States under Article 6 (Income From
Immovable Property (Real Property)), Article 12 (Royalties
and Fees for Included Services) as fees for included services
or Article 13 (Gains) of this Convention.
c) The tax referred to in subparagraph (a) shall not be
imposed at a rate exceeding:
i) the rate specified in paragraph 2 (a) of Article
10 (Dividends) for the tax described in subparagraph (a)
(i);and
ii) the rate specified in paragraph 2 (a) or (b)
(whichever is appropriate) of Article 11 (Interest) for
the tax described in subparagraph (a) (ii).
2. A company which is a resident of the United States may
be subject to tax in India at a rate higher than that
applicable to the domestic companies. The difference in the
tax rate shall not, however, exceed the existing difference
of 15 percentage points.
3. In the case of a banking company which is a resident of
the United States, the interest paid by the permanent
establishment of such a company in India to the head office
may be subject in India to a tax in addition to the tax
imposable under the other provisions of this Convention at a
rate which shall not exceed the rate specified in paragraph 2
(a) of Article 11 (Interest).