Notification No. 05

A tax treaty given effect under section 44A of the Income-tax Act, 1961

What this is

Notification No. 05 was published on 10 January 2008. Its subject is A tax treaty given effect under section 44A of the Income-tax Act, 1961.

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

The notification records a mutual agreement between the competent authorities of India and Finland under item (ii) of sub-paragraph (a) of paragraph 3 of Article 12 of the India-Finland Convention for the avoidance of double taxation with respect to taxes on income and on capital, made in exercise of the powers under section 90 of the Income-tax Act, 1961 and section 44A of the Wealth-tax Act, 1957. FINNVERA and Finnish Export Credit are included in the list of institutions mentioned in that item. In consequence, interest arising in India shall be exempt from Indian tax if it is paid to FINNVERA or Finnish Export Credit on or after 28 August 2007.

Why it was issued

The competent authority of Finland proposed the inclusion by letter dated 15 February 2007 and the competent authority of India conveyed consent by letter D.O. No. 501/13/80-FTD-I dated 28 August 2007, thereby constituting the mutual agreement the Convention requires.

Who it reaches

Indian borrowers paying interest to FINNVERA or Finnish Export Credit
FINNVERA and Finnish Export Credit as lenders
persons deducting tax at source on interest remitted to Finland
assessing officers examining exemption claims on such interest

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.44A	s.50
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. 5/2008, DATED 10-1-2008

Whereas in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961) and section 44A of the Wealth-tax Act, 1957 (27 of 1957) read with item (ii ) of sub-paragraph (a) of paragraph 3 of Article 12 of the Convention between the Government of the Republic of India and the Government of the Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital, the competent authorities of the Republic of India and the Republic of Finland have agreed to include FINNVERA and Finnish Export Credit in the list of institutions mentioned in item (ii) of sub-paragraph (a) of paragraph 3 of Article 12 of the said Convention.
And whereas the competent authority of the Republic of Finland vide their letter dated 15th February, 2007 has proposed to the competent authority of the Government of the Republic of India to consider to include FINNVERA and Finnish Export Credit to the list of those institutions referred in item (ii) of sub-paragraph (a) of paragraph 3 of Article 12 of the Convention and the competent authority of India vide their letter D.O. No. 501/13/80-FTD-I, dated 28th August, 2007 has conveyed their consent to the said proposal and thereby constituting a mutual agreement between the competent authorities of the Contracting States in the matter as required under the said Convention.
Now, therefore, under the provisions of paragraph 3 of Article 12 of the Convention between the Government of the Republic of India and the Government of the Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital, interest arising in India shall be exempt from Indian tax if the interest is paid to FINNVERA or Finnish Export Credit on or after 28th day of August, 2007.

[F. NO. 501/13/80-FTD-I]

From when

interest paid on or after 28 August 2007, retrospectively.

What to watch

The exemption applies to interest paid on or after 28 August 2007, the date of the Indian competent authority's consent, and not from the date of this notification of 10 January 2008.
The exemption is confined to the two named institutions.
It operates through paragraph 3 of Article 12 of the Convention, so the Convention's own conditions on interest continue to apply.

Where you meet it

In withholding on interest remitted to FINNVERA or Finnish Export Credit, and in a claim in the return or before the assessing officer that such interest is exempt from Indian tax.

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. 78 — Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prev 12 October 2009
Notification No. 5 — Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prev 7 January 2009
Notification No. 4 — Section 90 of the Income-tax Act, 1961 - Double taxation agreement - Agreement for Avoidance of Double Taxation and Prev 7 January 2009
Notification No. 368 — A tax treaty given effect under section 24A of the Income-tax Act, 1961 15 December 2006
Notification No. 54E- — A tax treaty given effect under section 24A of the Income-tax Act, 1961 19 January 2001
Notification No. 650(E) — A tax treaty given effect under section 24A of the Income-tax Act, 1961 10 July 2000

← Notification No. 06 · Notification No. 04 →

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.