Notification No. 186

All the provisions of the said Protocol amending the Convention between the Government of the Republic of India and the Government directed under section 90

What this is

Notification No. 186 was published on 19 July 2006. Its subject is All the provisions of the said Protocol amending the Convention between the Government of the Republic of India and the Government directed under section 90.

This one is about a tax treaty. India’s treaties enter Indian law by notification under section 90; where the instrument below is that notification, its date decides from when the treaty may be applied, and where it is a circular, it is the Board telling its officers how it reads the treaty — which is not the same thing.

What it does

Under section 90 of the Income-tax Act, 1961, the Central Government directs that all the provisions of the annexed Protocol amending the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, done at Tokyo on 24 February 2006, shall be given effect to in the Union of India with effect from 28 June 2006, that being the date it enters into force under paragraph 1 of Article V. The Protocol replaces paragraph 2 of Article 10 of the Convention so that tax on dividends in the source State does not exceed 10 per cent of the gross amount where the recipient is the beneficial owner; replaces paragraph 2 of Article 11 with the same 10 per cent ceiling for interest; replaces paragraph 2 of Article 12 with a 10 per cent ceiling for royalties and fees for technical services; and deletes sub-paragraph (c) of paragraph 3 of Article 23. The Convention amended is the one signed at New Delhi on 7 March 1989.

Who it reaches

Indian companies paying dividends, interest, royalties or fees for technical services to Japanese beneficial owners
Japanese residents receiving such income from India
deductors applying the treaty rate at source
assessees claiming credit or relief under Article 23

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.90	s.159

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

NOTIFICATION NO. 186/2006, DATED 19-7-2006

S.O. 1136(E).—Whereas the annexed Protocol amending the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income shall enter into force on the 28th day of June, 2006 in accordance with paragraph 1 of Article V of the Protocol amending the Convention for giving effect to the provisions of the said Protocol;
Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said Protocol amending the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income shall be given effect to in the Union of India with effect from the 28th day of June, 2006.
[F. No. 506/69/81-FTD-I]
ANNEXURE
Protocol Amending the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
The Government of the Republic of India and the Government of Japan,
Desiring to amend the Convention between the Government of the Republic of India and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income signed at New Delhi on 7th March, 1989 (hereinafter referred to as "the Convention"),
Have agreed as follows:
ARTICLE I
Paragraph 2 of Article 10 of the Convention shall be deleted and replaced by the following :
"2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 10 per cent of the gross amount of the dividends.
The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid."

ARTICLE II
Paragraph 2 of Article 11 of the Convention shall be deleted and replaced by the following:
"2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of the Contracting State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest."
ARTICLE III
Paragraph 2 of Article 12 of the Convention shall be deleted and replaced by the following :
"2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services."
ARTICLE IV
Sub-paragraph (c) of paragraph 3 of Article 23 of the Convention shall be deleted.
ARTICLE V
1. This Protocol shall be approved in accordance with the legal procedures of each of the Contracting States and shall enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval.
2. This Protocol shall be applicable :
(a) in Japan:
(i) with respect to taxes withheld at source :
(aa) for amounts taxable on or after 1st July of the calendar year in which the Protocol enters into force, if the Protocol enters into force before 1st July of a calendar year; or
(bb) for amounts taxable on or after 1st January of the calendar year next following the year in which the Protocol enters into force, if the Protocol enters into force after 30th June of a calendar year; and
(ii) with respect to taxes on income which are not withheld at source, as regards income for any taxable year beginning on or after 1st January of the calendar year next following that in which the Protocol enters into force; and
(b) in India:
(i) with respect to taxes withheld at source, for amounts paid or credited on or after 1st April of the calendar year next following that in which the Protocol enters into force;
and
(ii) with respect to taxes on income for any previous year beginning on or after 1st April of the calendar year next following that in which the Protocol enters into force.
3. This Protocol shall remain in effect as long as the Convention remains in force.
In witness whereof the undersigned, duly authorized thereto by their respective Governments, have signed this Protocol.
Done in duplicate at Tokyo on this 24th day of February, 2006 in the Hindi, Japanese and English languages, each text being equally authentic. In case of any divergence of interpretations, the English text shall prevail.

From when

28 June 2006.

What to watch

The notification directs effect from 28 June 2006, but paragraph 2 of Article V sets out its own application dates: in India, for taxes withheld at source, to amounts paid or credited on or after 1 April of the calendar year next following the year of entry into force, and for other taxes on income, to any previous year beginning on or after that date.
The withholding ceilings on dividends, interest, and royalties and fees for technical services are all brought to 10 per cent of the gross amount, and only where the recipient is the beneficial owner.
Sub-paragraph (c) of paragraph 3 of Article 23 stands deleted.
The Protocol remains in effect only so long as the Convention remains in force, and in case of divergence of interpretation the English text prevails.

Where you meet it

In the withholding on a payment of royalty, fees for technical services, interest or dividend to a Japanese resident, and in the certificate or return in which the treaty rate is applied.

An example

Ours, not the Board’s: a worked case built from the rule the instrument sets, to show how it falls out.

On royalty of Rs. 1 crore paid to a Japanese beneficial owner after the Protocol applies, tax in India is limited to 10 per cent of the gross amount, that is Rs. 10 lakh, in place of the higher rate under the unamended paragraph 2 of Article 12.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 56/2026 [F. No. 500/22/2022-FT&TR-V] / S.O. 1715(E) — Ministry of Finance 2 April 2026
Notification No. 32/2025 [F. No. 370142/9/2025-TPL] / SO 1650(E) — Under the Direct Tax Vivad se Vishwas Scheme notified under section 89 8 April 2025
Circular No. 20/2024 — Extension of due date for determining amount payable as per column (3) of Table specified in section 90 of Direct Tax Vi 30 December 2024
Circular No. 19/024 — On provisions of the direct tax vivad se vishwas scheme 2024 16 December 2024
Notification No. 33/2024 [F.No. 503/2/1986-FTD-I] / SO 1484(E) — Ministry of Finance 19 March 2024
Notification No. 1/2024 — Specifying forms returns statements reports orders by whatever name called prescribed in appendix ii to be furnished ele 26 February 2024

What a notification is. A notification is made under a power the Act itself gives, and within that power it is law — unlike a circular, which only binds the department. Its reach is the reach of the enabling provision and no wider, and the date it carries decides from when it works.

Source: the Income Tax Department’s own published text — its page for this instrument.