India–Israel tax treaty — rates, PE and MLI

The rates, at a glance

Every figure below is taken from the article named beside it, not from a rates table. Read the condition in the same row before you use the rate — in this treaty the condition is usually the whole answer.

Income	Rate	The condition attached to it	Article
Dividends	10 per cent of the gross amount — A single flat ceiling with no shareholding threshold and no second tier. Art. 10(2). The only condition is that 'the recipient is the beneficial owner of the dividends'. There is no participation test to satisfy and none to fail, and no minimum holding period. The dividend rate was not touched by the 2015 Amending Protocol.	None in Article 10 — it is one sentence with one rate. But since the 2015 amending protocol there is A condition that sits outside article 10 and applies to IT: art. 27A(3) provides that 'Any benefit under…	Article 10, paragraph 2 (rate and beneficial-ownership condition, with the profits-of-the-company saving as a separate sentence); 3 (definition); 4 (PE/fixed-base carve-out disapplying paragraphs 1 AND 2, throwing the income to Art. 7 or Art. 15); 5 (no extra-territorial taxation of dividends, no tax on undistributed profits)
Interest	10 per cent of the gross amount, conditional on 'the recipient [being] the beneficial owner of the interest'. Art. 11(2).	Article 11(3) is the most unusual interest exemption in the whole sweep, because IT is keyed to the origin or credit support of the loan rather than to the identity of the recipient. Every other treaty in this…	Article 11, paragraph 2 (10 per cent ceiling); 3(a) (sovereign bonds, debentures and similar obligations of the source State); 3(b)(i)-(iii) (loans and credits made, refinanced, guaranteed or insured by the Reserve Bank of India, the Bank of Israel, or bodies agreed by exchange of notes); 4 (definition, expressly excluding PENALTY CHARGES FOR LATE PAYMENT); 5 (PE/fixed-base carve-out, disapplying paragraphs 1, 2 AND 3); 6 (source rule — the WIDE payer formula plus PE-borne deeming); 7 (special-relationship excess)
Royalties	10 per cent of the gross amount, conditional on 'the recipient [being] the beneficial owner of the royalties'. Art. 12(2). A single flat rate. Royalties and fees for technical services are in separate articles on this treaty (12 and 13) but carry the same 10 per cent ceiling.	The art. 12(3) definition is the narrowest royalty definition in this entire sweep and the reason is an absence. In full: 'payments of any kind received as a consideration for the use of, or the right to use…	Article 12, paragraph 2 (rate); 3 (definition — SEE THE OMISSION); 4 (PE/fixed-base carve-out disapplying paragraphs 1 AND 2); 5 (source rule — wide payer formula plus PE-borne deeming); 6 (special-relationship excess)
Fees for technical services	10 per cent of the gross amount, conditional on 'the recipient [being] the beneficial owner of the fees for technical services'. Art. 13(2). There is A full standalone fees for technical services article — Article 13, sitting between Royalties (12) and Capital Gains (14) — and it is properly titled, unlike Kuwait's (hidden under a Royalties heading) and Oman's (headed 'Technical Fees').	There is no make-available limb — but this article is nevertheless the most taxpayer-favourable FTS article in the batch, for two reasons that have nothing to do with make-available. The definition itself is…	Article 13, paragraph 2 (rate); 3 (definition, excluding Article 16 payments); 4 (PE/fixed-base carve-out, drafted by reference to 'the right, property OR CONTRACT in respect of which the fees ... are paid'); 5 (source rule — CUMULATIVE place-of-rendering AND payer test, plus PE-borne deeming); 6 (special-relationship excess); 7 (the five-item exclusion list)

Status

In force	15 may 1996. Signed at new delhi on 29 january 1996 in Hindi, Hebrew and English, all texts equally authentic, the english text to prevail in case of any divergence in interpretation. This is an income and capital convention, not an income-only treaty — it is the only instrument in this batch that covers taxes on capital, it has a freestanding Article 23 (Capital), and the Indian notification was issued under both section 90 of the Income-tax Act 1961 and section 44A of the wealth-tax act 1957. The effect dates are genuinely retrospective and that is the most unusual feature of article 29. Art. 29(2) provides that the Convention has effect: in india, (i) for taxes withheld at source on dividends, interest, royalties and fees for technical services as defined in Articles 10, 11, 12 and 13, for amounts paid or credited on or after the first day of the month next following that in which the convention enters into force (so 1 June 1996), and (ii) for taxes on income and taxes on capital, for fiscal years beginning on or after the first day of april 1994 — a fixed calendar date two years before entry into force, not the usual 'next following the calendar year' formula. In israel, the same withholding rule, and for other taxes 'for taxable periods beginning on or after the first day of january 1994'. A drafting slip in Art. 29(2) should also be noted: it says the Convention enters into force 'on the date of the letter of such notifications', evidently for 'the later'. Art. 30 permits termination by notice on or before 30 June in any calendar year beginning after five years from entry into force.
Given effect by	Notification No. G.S.R. 256(E) [No. 10134 (F. No. 503/5/92-ftd)], dated 26-6-1996 — issued under section 90 of the Income-tax Act 1961 and section 44A of the Wealth-tax Act 1957, directing that all the provisions of the Convention be given effect to in the Union of India. The citation line as it now stands continues: 'as amended by Notification No. S.O. 441(E) [No. 10/2017 (F. No. 500/14/2004-ft-II)], dated 14-2-2017'.
Modified by the MLI	No synthesised text was found for this treaty in the source searched.
Principal purpose test	There is A main-purpose test in art. 27A(1), but IT is not the MLI principal purposes test and the differences matter in both directions. In full: 'Benefits of this Convention shall not be available to A resident of a Contracting State, or with respect to any transaction undertaken by such resident, if the main purpose or one of the main purposes of the creation or existence of such resident or of the transaction undertaken by IT, was to obtain benefits under this Convention that would not otherwise be available.' four points. (i) IT reaches both entity-level and transaction-level purposes — 'the creation or existence of such resident or of the transaction undertaken by it'. That is wider than Saudi Arabia's Art. 26(2), which is confined to the purpose of the creation of an enterprise, and the words 'or existence' mean a vehicle that was formed innocently but is now maintained for treaty purposes is caught. (ii) the threshold is 'the main purpose or one of the main purposes' — the same low threshold as Malaysia and Nepal, and much lower than Kuwait's 'the primary purpose'. (iii) the benefit must be one 'that would not otherwise be available' — a limiting qualifier absent from the Malaysian and Nepalese formulations and from the MLI PPT. (iv) there is no object-and-purpose saving clause. The MLI Art. 7(1) PPT, the Qatari Art. 28, the Omani Art. 27B and the substituted Sri Lankan Art. 28(6) all allow a taxpayer to escape by establishing that granting the benefit would accord with the object and purpose of the relevant provisions; Art. 27A(1) offers no such escape. And the preamble was not amended — it recites only the desire to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion, with no beps treaty-shopping language — so there is little object-and-purpose material to argue from in any event. On its face this test is therefore harsher than the MLI standard. Whether an MLI PPT additionally applies is not established by this source; see gaps.

Dividends

Rate	10 per cent of the gross amount — A single flat ceiling with no shareholding threshold and no second tier. Art. 10(2). The only condition is that 'the recipient is the beneficial owner of the dividends'. There is no participation test to satisfy and none to fail, and no minimum holding period. The dividend rate was not touched by the 2015 Amending Protocol.
The holding that unlocks it	None in Article 10 — it is one sentence with one rate. But since the 2015 amending protocol there is A condition that sits outside article 10 and applies to IT: art. 27A(3) provides that 'Any benefit under this Convention shall not be granted to a person who is not the beneficial owner of the item of income.' Article 10(2) already carries its own beneficial-ownership condition, so for dividends the two overlap; the significance of Art. 27A(3) is that it extends the same requirement to articles that have no such condition of their own, including Article 14 (Capital Gains).
Where this comes from	Article 10, paragraph 2 (rate and beneficial-ownership condition, with the profits-of-the-company saving as a separate sentence); 3 (definition); 4 (PE/fixed-base carve-out disapplying paragraphs 1 AND 2, throwing the income to Art. 7 or Art. 15); 5 (no extra-territorial taxation of dividends, no tax on undistributed profits)

The art. 10(3) definition is the wide civil-law form: 'income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits' — the same breadth as the Saudi and Kuwaiti definitions. There is no sovereign or central-bank exemption in article 10, unlike Kuwait's Art. 10(3) and Qatar's Art. 10(3); on this treaty the sovereign-type relief is confined to the interest article. There is no underlying tax credit. Whether there was ever tax sparing cannot be stated from this record, because the 2015 Amending Protocol omitted paragraphs 3 and 4 of Article 24 and their text was not read — what survives in Article 24 is ordinary credit (paragraphs 1 and 2) plus exemption-with-progression (paragraph 5).

Interest

Rate	10 per cent of the gross amount, conditional on 'the recipient [being] the beneficial owner of the interest'. Art. 11(2).
Exemptions	Article 11(3) is the most unusual interest exemption in the whole sweep, because IT is keyed to the origin or credit support of the loan rather than to the identity of the recipient. Every other treaty in this batch exempts interest 'derived and beneficially owned by' a listed body — so the exempt institution must itself be the lender and the beneficial owner of the interest. This one does not. Art. 11(3) provides that interest 'shall be taxable only in that other state, if the interest is paid in respect of' the following. Art. 11(3)(a) — sovereign debt instruments, keyed to the issuer: 'a bond, debenture or other similar obligation of the government of the first-mentioned contracting state or a political sub-division or local authority thereof'. Note that the first-mentioned Contracting State is the source State — so interest on Indian Government, State Government or local authority paper held by an Israeli resident is taxable only in Israel, whoever the holder is. This is an exemption for sovereign borrowing, not for sovereign lending, and it is available to ordinary private investors. Art. 11(3)(b) — loans made, refinanced, guaranteed or insured by A listed body, and this is the limb that most rewards careful reading: 'a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by — (i) in the case of India, the reserve bank of india, (ii) in the case of Israel, the bank of israel, or (iii) other governmental agencies or lending institutions as may be specified and agreed in an exchange of notes between the competent authorities.' the exemption follows the loan, not the lender. A commercial bank's loan that is merely guaranteed or insured by the Reserve Bank of India or the Bank of Israel attracts the exemption even though the interest is received by, and beneficially owned by, the commercial bank. The four verbs — made, refinanced, guaranteed, insured — each stand alone, and 'credit extended' is added alongside 'loan made'. That is a materially wider mechanism than anything else in this batch, and a rates table reporting '10 per cent, with an exemption for the central bank' would state the position wrongly. What limits IT. (i) Limb (b)(iii) is not self-executing: further agencies or lending institutions must be 'specified and agreed in an exchange of notes between the competent authorities'. Until such an exchange of notes exists the list is the two central banks. (ii) there is no exim bank, no national housing bank and no generic government limb for lending — Art. 11(3)(a) covers government borrowing only, so interest paid to the Government of the other State on a loan it made is not within (a) and depends on (b). (iii) The exemption is expressed as exclusive residence taxation ('shall be taxable only in that other State'), not as an exemption from source tax in terms. (iv) art. 11(5) disapplies 'paragraphs 1, 2 and 3' where the debt-claim is effectively connected with a PE or fixed base — so the paragraph 3 exemption is taken away by a PE connection, unlike under the Saudi, Kuwaiti and Omani treaties, whose PE carve-outs reach only paragraphs 1 and 2.
Where this comes from	Article 11, paragraph 2 (10 per cent ceiling); 3(a) (sovereign bonds, debentures and similar obligations of the source State); 3(b)(i)-(iii) (loans and credits made, refinanced, guaranteed or insured by the Reserve Bank of India, the Bank of Israel, or bodies agreed by exchange of notes); 4 (definition, expressly excluding PENALTY CHARGES FOR LATE PAYMENT); 5 (PE/fixed-base carve-out, disapplying paragraphs 1, 2 AND 3); 6 (source rule — the WIDE payer formula plus PE-borne deeming); 7 (special-relationship excess)

The Art. 11(4) definition is the plain one, with no renvoi limb and no Islamic-finance limb. Penalty charges for late payment are expressly excluded from Article 11 and — because Art. 22(3) on this treaty is confined to gambling winnings — they fall to Art. 22(1) and residence-only taxation, the same favourable outcome as under the Nepal treaty. The source rule in Art. 11(6) is the wide form, matching Art. 12(5) for royalties but not Art. 13(5) for fees for technical services, which adds a cumulative place-of-rendering requirement.

Royalties

Rate	10 per cent of the gross amount, conditional on 'the recipient [being] the beneficial owner of the royalties'. Art. 12(2). A single flat rate. Royalties and fees for technical services are in separate articles on this treaty (12 and 13) but carry the same 10 per cent ceiling.
Where this comes from	Article 12, paragraph 2 (rate); 3 (definition — SEE THE OMISSION); 4 (PE/fixed-base carve-out disapplying paragraphs 1 AND 2); 5 (source rule — wide payer formula plus PE-borne deeming); 6 (special-relationship excess)

The art. 12(3) definition is the narrowest royalty definition in this entire sweep and the reason is an absence. In full: 'payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.' there is no equipment limb. The words 'or for the use of, or the right to use, industrial, commercial or scientific equipment' — which appear in the royalty definition of every single other treaty in this batch (Malaysia, Thailand, Sri Lanka, Nepal, Bangladesh, Qatar, Saudi Arabia, Kuwait, Oman) — are absent here. Equipment hire is therefore not A royalty under the india-israel convention. It is not caught by Article 13 either, which taxes services rather than the use of property. It falls to be characterised as business profits under Article 7 — and because Article 5 has no service PE limb, no agency limb beyond contract-concluding authority, and a six-month construction threshold, an equipment lessor with no fixed place of business in India will commonly have no permanent establishment and therefore no Indian tax at all. Note also that the definition covers 'cinematograph films' but not films or tapes used for radio or television broadcasting, which the other treaties name separately.

Fees for technical services

Rate	10 per cent of the gross amount, conditional on 'the recipient [being] the beneficial owner of the fees for technical services'. Art. 13(2). There is A full standalone fees for technical services article — Article 13, sitting between Royalties (12) and Capital Gains (14) — and it is properly titled, unlike Kuwait's (hidden under a Royalties heading) and Oman's (headed 'Technical Fees').
Make-available requirement	No
Where this comes from	Article 13, paragraph 2 (rate); 3 (definition, excluding Article 16 payments); 4 (PE/fixed-base carve-out, drafted by reference to 'the right, property OR CONTRACT in respect of which the fees ... are paid'); 5 (source rule — CUMULATIVE place-of-rendering AND payer test, plus PE-borne deeming); 6 (special-relationship excess); 7 (the five-item exclusion list)

There is no make-available limb — but this article is nevertheless the most taxpayer-favourable FTS article in the batch, for two reasons that have nothing to do with make-available. The definition itself is broad. Art. 13(3): 'payments of any kind received as a consideration for services of a managerial, technical or consultancy nature, including the provision of services by technical or other personnel, but does not include payments for services mentioned in article 16 of this convention.' Note that the only exclusion in paragraph 3 is Article 16 (dependent Personal Services) — Article 15 (Independent Personal Services) is not excluded there, and is instead dealt with in the paragraph 7 list below. First, art. 13(7) is A five-item exclusion list that no other treaty in this batch has, and it is the ancillary-and-subsidiary machinery familiar from the US and UK treaties: 'The provisions of paragraphs 1 to 6 of this Article shall not apply to payments relating to services mentioned hereinbelow: (i) services that are ancillary and subsidiary, and inextricably and essentially linked, to A sale of property; (ii) services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; (iii) teaching in or by an educational institution; (iv) services for the personal use of the individual or individuals making the payments; or (v) professional services as defined in article 15.' Note the doubled qualifier in item (i) — the services must be both 'ancillary and subsidiary' and 'inextricably and essentially linked' to the sale — which is a demanding test, and it must be quoted in full. Item (v) is what routes independent professional services to Article 15 and its own thresholds (a fixed base regularly available, or a stay exceeding in the aggregate the period specified there). Second, and more powerful still, the source rule in art. 13(5) is cumulative where every other treaty'S is not: 'Fees for technical services shall be deemed to arise in a Contracting State when the services are rendered in that state **and** the payer is that state itself, A political sub-division, A local authority or A resident of that state.' both conditions must be met. Compare Art. 12(5) for royalties in the same Convention, which requires only that the payer be a resident of that State. The consequence is that services performed wholly outside india for an indian payer are not sourced in india under the first sentence of art. 13(5), and therefore fall outside Article 13's charging rule altogether — a position squarely at odds with the Indian domestic-law rule and with the payer-based source rules in the Malaysian, Sri Lankan, Nepalese, Qatari, Kuwaiti and Omani treaties. The second sentence of Art. 13(5) preserves the PE-borne deeming rule, which operates independently of the first.

Capital gains on shares

Treatment	Source-state taxation of share gains is fully preserved, but article 14 is the most modern capital gains article in this batch because paragraph 4 was replaced by the 2015 amending protocol. Art. 14(4) as substituted: 'Gains derived by a resident of a Contracting State from the alienation of: (a) shares, deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other State (at the time of the alienation or at any time during the twelve preceding months); or (b) an interest in A partnership, trust or other entity, deriving more than 50 per cent of its value directly or indirectly from immovable property situated in that other State (at the time of the alienation or at any time during the twelve preceding months); may be taxed in that other State.' art. 14(5) sweeps up the rest and is also wider than its counterparts: 'Gains derived by a resident of a Contracting State from the sale, exchange or other disposition, directly or indirectly, of shares other than those mentioned in paragraph 4, or similar rights in a company which is a resident of the other Contracting State may also be taxed in that other State.' So all gains on shares in an Indian company are taxable in India, and the words 'or other disposition, directly or indirectly' and 'or similar rights' extend the paragraph beyond a simple sale of shares.
Grandfathering	None. There is no grandfathering date, no acquisition-date test, no disposal-date test, no transitional window and no reduced-rate period anywhere in Article 14. Nor did the 2015 Amending Protocol introduce one when it replaced paragraph 4 — it made the paragraph wider, not narrower. The only temporal rule in Article 14 is the twelve-month look-back in paragraph 4, which is a widening device, not a relief.
Conditions	(i) this is the only treaty in this batch with A look-back period. Art. 14(4) tests the more-than-50-per-cent immovable property value 'at the time of the alienation or at any time during the twelve preceding months'. Malaysia and Qatar state a 50 per cent threshold but test it only at alienation; Thailand, Sri Lanka, Nepal, Saudi Arabia, Kuwait and Oman leave the threshold as the undefined word 'principally' with no testing date at all. Stripping property out of a company shortly before a sale therefore does not work here. (ii) the paragraph reaches non-corporate vehicles. Sub-paragraph (b) covers 'an interest in a partnership, trust or other entity'. Under every other treaty in this batch, interests in partnerships and trusts fall out of the shares paragraphs and land in the residual residence-only paragraph. (iii) both limbs apply directly or indirectly, so tiered structures over Indian real estate are caught. (iv) art. 14(5) is confined to A company resident in the other contracting state, so gains on third-country company shares not caught by paragraph 4 fall to Art. 14(6). (v) art. 14(6) is the orthodox residence-only residual. (vi) Art. 14(3) gives exclusive taxation to the State of which the enterprise is a resident for ships and aircraft in international traffic. (vii) since the 2015 amending protocol, art. 27A(3) imposes A beneficial-ownership condition on every benefit under the convention, including article 14 — which no other treaty in this batch does for capital gains — and Art. 27A(1) applies its main-purpose test to 'any transaction undertaken by' the resident, not merely to the resident's creation. (viii) Note a drafting oddity running through the article: paragraphs 1, 2 and 5 all say gains 'may also be taxed' in the other State, where the standard formulation is 'may be taxed'.
Where this comes from	Article 14, paragraph 1 (immovable property); 2 (PE/fixed-base movable property); 3 (ships and aircraft, taxable only in the enterprise's State); 4(a) and 4(b) (shares, and interests in partnerships, trusts or other entities, deriving more than 50 per cent of value from immovable property, with a twelve-month look-back — as substituted by the Amending Protocol of 14 October 2015); 5 (all other shares or similar rights in a company resident of the other State, including indirect dispositions); 6 (residual — residence only)

Permanent establishment

Construction or installation PE	More than six months — Art. 5(3), which is a paragraph of its own: 'A building site or construction or assembly project or supervisory activities in connection therewith constitute a permanent establishment only if such site, project or activity last more than six months.' Expressed in months, not days — do not convert from the 182- and 183-day formulations used by Saudi Arabia, Thailand, Sri Lanka, Nepal, Bangladesh and Kuwait. It is more than six months, so a project of exactly six months does not create a PE. Supervisory activities are inside the threshold. Note that 'installation' is absent — the paragraph covers 'a building site or construction or assembly project', as in the Oman treaty. There is no aggregation-of-periods language, no reference period, no contract-splitting rule and no anti-fragmentation rule; the 2015 Amending Protocol did not touch Article 5 at all.
Service PE	There is no service PE limb in this convention. Article 5 has no 'furnishing of services' paragraph and no days threshold for services. Its structure is: (1) fixed place of business definition; (2) inclusive list of six items; (3) the six-month construction limb; (4) the preparatory-and-auxiliary exclusion list; (5) the agency limb; (6) the independent-agent protection; (7) the control-is-not-PE saving. That is the whole article. Israel is the third treaty in this batch with no service PE limb, alongside Bangladesh and Oman. As on the oman treaty, however, the consequence is not that service income escapes — there is A full FTS article at article 13, taxing at 10 per cent gross. The absence of a service PE limb means only that long service engagements do not convert the gross charge into net PE taxation. What actually protects the Israeli service provider on this treaty is the cumulative source rule in Art. 13(5) and the five-item exclusion list in Art. 13(7), not Article 5.
Agency PE	Yes, but IT is A single limb — the narrowest agency provision in this batch alongside Oman's. Art. 5(5) deems a PE only where a dependent person 'has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise', subject to the Art. 5(4) preparatory-and-auxiliary carve-out. There is no stock-and-delivery limb and no order-securing limb. Art. 5(6), the independent-agent protection, uses A test found nowhere else in this batch — IT is an arm'S-length test, not an exclusivity test: an enterprise is not deemed to have a PE merely because it carries on business through a broker, general commission agent or other agent of independent status, 'provided that such persons are acting in the ordinary course of their business, and in their commercial and financial relations with the enterprise, no conditions are agreed or imposed which differ from those usually agreed between independent persons.' So an agent who works exclusively for one principal keeps his independent status provided the terms are arm's length — the opposite of the position under Malaysia, Thailand, Sri Lanka, Nepal, Saudi Arabia, Kuwait and Qatar, all of which withdraw the protection on exclusivity (Malaysia and Qatar requiring non-arm's-length terms in addition). Oman withdraws it on neither. There is also no insurance PE paragraph.
Where this comes from	Article 5

Art. 5(2) is a short inclusive list of six items only: a place of management, a branch, an office, a factory, a workshop, and 'a mine, an oil or gas well, a quarry or any other place of extraction of natural resources'. There is no sales outlet, no warehouse limb and no farm or plantation limb. Art. 5(4) is the original pre-beps exclusion list in the old wide form: sub-paragraphs (a) and (b) expressly cover 'storage, display or delivery', so a delivery warehouse is outside the PE definition; and (a), (b) and (c) are standalone exclusions not themselves subject to a preparatory-or-auxiliary condition, which is attached only to (e) and to the combination rule in (f). Art. 5(7) is the standard control-is-not-PE saving. Note also protocol paragraph 1, which is the only surviving paragraph of the original Protocol and which qualifies Art. 7(3): a Contracting State may determine executive and administrative head-office expenses incurred outside that State according to its internal laws as they existed at 29 january 1996, and any future domestic change that further restricts such deductions triggers an obligation to consult with a view to amending the paragraph.

Anti-abuse: limitation of benefits, and the MLI

LOB	Yes — article 27A, headed limitation of benefits, inserted by the Amending Protocol of 14 October 2015 (given effect by Notification No. S.O. 441(E) [No. 10/2017] dated 14-2-2017). The 1996 convention had no anti-abuse article at all. It is not an objective LOB of the Sri Lankan kind — there is no qualified-person gateway, no listed-company test, no ownership or base-erosion test, no active-business relief and no competent-authority relief. It has three paragraphs and all three are operative. Art. 27A(2) is A domestic-law saving, and it is wider than the Saudi equivalent: 'The Convention shall not prevent a Contracting State from applying its domestic law on prevention of tax evasion or tax avoidance.' Both evasion and avoidance are named, so GAAR and the judicial anti-avoidance doctrines are expressly preserved — contrast Saudi Arabia's Art. 26(1), which saves only provisions 'to prevent tax evasion'. Art. 27A(3) is A treaty-wide beneficial-ownership condition and IT is the paragraph most likely to be overlooked: 'Any benefit under this Convention shall not be granted to a person who is not the beneficial owner of the item of income.' Articles 10, 11, 12 and 13 already carry their own beneficial-ownership conditions; the work Art. 27A(3) does is to impose the same requirement on every other article, including Article 14 (Capital Gains), Article 7 and Article 22. No other treaty in this batch has a general beneficial-ownership requirement of this kind.
PPT	There is A main-purpose test in art. 27A(1), but IT is not the MLI principal purposes test and the differences matter in both directions. In full: 'Benefits of this Convention shall not be available to A resident of a Contracting State, or with respect to any transaction undertaken by such resident, if the main purpose or one of the main purposes of the creation or existence of such resident or of the transaction undertaken by IT, was to obtain benefits under this Convention that would not otherwise be available.' four points. (i) IT reaches both entity-level and transaction-level purposes — 'the creation or existence of such resident or of the transaction undertaken by it'. That is wider than Saudi Arabia's Art. 26(2), which is confined to the purpose of the creation of an enterprise, and the words 'or existence' mean a vehicle that was formed innocently but is now maintained for treaty purposes is caught. (ii) the threshold is 'the main purpose or one of the main purposes' — the same low threshold as Malaysia and Nepal, and much lower than Kuwait's 'the primary purpose'. (iii) the benefit must be one 'that would not otherwise be available' — a limiting qualifier absent from the Malaysian and Nepalese formulations and from the MLI PPT. (iv) there is no object-and-purpose saving clause. The MLI Art. 7(1) PPT, the Qatari Art. 28, the Omani Art. 27B and the substituted Sri Lankan Art. 28(6) all allow a taxpayer to escape by establishing that granting the benefit would accord with the object and purpose of the relevant provisions; Art. 27A(1) offers no such escape. And the preamble was not amended — it recites only the desire to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion, with no beps treaty-shopping language — so there is little object-and-purpose material to argue from in any event. On its face this test is therefore harsher than the MLI standard. Whether an MLI PPT additionally applies is not established by this source; see gaps.
Subject to tax	No subject-to-tax or liable-to-tax condition is attached to any distributive article. The residence article is the bare formula, as in Bangladesh and Oman: Art. 4(1) provides that 'resident of a Contracting State' means 'any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.' that is the whole paragraph. There is no second sentence excluding A person liable to tax only on source income, and there is no sentence bringing the State, its political subdivisions, local authorities or statutory bodies within the definition. Israel taxes its residents on worldwide income, so the practical pressure on the residence test is much lower here than on the three Gulf treaties in this batch, and the treaty accordingly contains none of the deeming machinery those treaties need (no nationality-plus-presence rule, no governmental-institutions paragraph, no Protocol gloss). The individual tie-breaker in Art. 4(2) is the orthodox permanent-home / centre-of-vital-interests / habitual-abode / nationality / mutual-agreement cascade. The corporate tie-breaker in art. 4(3) remains place of effective management, with a mutual-agreement fallback where that cannot be determined — the 2015 Amending Protocol did not replace it with an MLI Article 4 competent-authority rule, so a dual-resident company is not stripped of benefits by default here as it is under the Qatar and Oman treaties. What does police abuse on this treaty is art. 27A, and in particular the general beneficial-ownership requirement in art. 27A(3).
Where this comes from	Article 27A (Limitation of Benefits — paragraphs 1, 2 and 3, inserted by the Amending Protocol of 14 October 2015); Article 4(1) (residence, in its bare form)

No Synthesised Text for Israel has been identified from the sources used here. The notified text carries six amendment markers, and every one of them traces to the amending protocol of 14 October 2015 given effect by Notification No. S.O. 441(E) [No. 10/2017] dated 14-2-2017 — not to the MLI. The distinction matters. The 2015 Amending Protocol was a bilaterally negotiated instrument that pre-dates the MLI, and although its content overlaps with the beps outputs (a 50-per-cent-plus-look-back capital gains rule resembling MLI Art. 9(4), a purpose-based limitation of benefits resembling but not identical to the MLI Art. 7(1) PPT, and a modern exchange-of-information article), IT is not the MLI text. In particular: the preamble was not amended and contains no beps treaty-shopping recital; Art. 27A(1) uses 'the main purpose or one of the main purposes' rather than the MLI's 'one of the principal purposes', and it has no object-and-purpose saving clause; the corporate tie-breaker in Art. 4(3) remains place of effective management and was not replaced by an MLI Art. 4 competent-authority rule; and Article 5 was left entirely untouched. Whether the MLI additionally modifies this treaty cannot be established from this source and is recorded as a gap.

The protocols, in order

A treaty read without its protocols is a wrong answer.

There is one amending protocol and IT is substantial. The 'protocol amending the convention and the protocol' was signed at jerusalem, israel on 14 october 2015 in Hindi, Hebrew and English, all texts equally authentic, 'the english text to be the operative one in any case of doubt' — note that this is a different and stronger formulation than the original Convention's 'the English text shall prevail'. It was given effect in India by notification no. S.O. 441(E) [No. 10/2017 (F. No. 500/14/2004-ft-II)], dated 14-2-2017. Note that the Amending Protocol amends both the Convention and the original Protocol.
Amending protocol article 1 replaced the capital gains shares paragraph, and this is the most important change. It omitted paragraph 4 of Article 14 and substituted a new paragraph 4 which (i) states a hard more than 50 per cent threshold, (ii) adds a twelve-month look-back — 'at the time of the alienation or at any time during the twelve preceding months' — and (iii) extends beyond shares to 'an interest in A partnership, trust or other entity'. See capital_gains_shares. This is the only treaty in this batch with A look-back period in the immovable-property share test.
Amending protocol article 2 omitted paragraphs 3 and 4 of article 24 (elimination of double taxation). Those paragraphs no longer exist; Article 24 now runs 1, 2, 5. Their content was not read in this record — see gaps — but the position of omitted paragraphs 3 and 4 in an elimination article, and the fact that what survives is ordinary credit plus exemption-with-progression, indicates that what was removed was tax-sparing or deemed-paid machinery.
Amending protocol article 3 replaced article 27 (exchange of information) with the modern OECD text: 'foreseeably relevant' standard, exchange not restricted by Article 1, the no-domestic-interest obligation in paragraph 4, and the bank-secrecy override in paragraph 5. It also contains a use-for-other-purposes clause that is not in every modern exchange article: 'Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorizes such use.' Both conditions are cumulative.
Amending protocol article 4 inserted article 27A, limitation of benefits. There was no anti-abuse article in the 1996 Convention. See anti_abuse for the three paragraphs, the third of which is a treaty-wide beneficial-ownership condition.
Amending protocol article 5 omitted paragraphs 2 and 3 of the original protocol, leaving only paragraph 1 (the head-office expenses rule). The omitted paragraphs were not read — see gaps.
Entry into force and effect of the amending protocol, under its Article 6: the States notify each other in writing through diplomatic channels of completion of domestic requirements; the Amending Protocol 'shall form an integral part of the Convention, shall enter into force on the date of the last notification', and thereupon has effect (a) in india, for taxes on income and taxes on capital, for fiscal years beginning on or after the first day of april next following the date of entry into force; (b) in israel, for taxable periods beginning on or after 1 january next following; and (c) — differently from (a) and (b) — 'for the purposes of article 27 (exchange of information) of the convention, from the date of entry into force of the amending protocol.' So the new exchange-of-information article took effect immediately on entry into force, with no fiscal-year lead-in, while the capital gains and limitation-of-benefits changes waited for the next fiscal year. That split is easy to miss and matters for any information request or any transaction in the intervening months.
The original protocol of 29 January 1996 survives in part. Only paragraph 1 remains: 'Nothing in the provisions of paragraph 3 of Article 7 shall be interpreted as precluding a Contracting State from determining executive and administrative expenses of A head office incurred outside that Contracting State according to the provisions of internal laws as they exist at the time of the signing of this convention. However, should future changes in the domestic law of a Contracting State further restrict the deduction of such expenses in any manner, then the two Contracting States shall consult each other for purposes of amending this paragraph.' Two qualifiers travel with it: the domestic limitation is frozen to the law as at 29 January 1996, and any subsequent tightening triggers an obligation to consult.

The words themselves

Quoted from the treaty as notified.

a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by-

Article 11, paragraph 3(b) of the treaty as notified.

a bond, debenture or other similar obligation of the Government of the first-mentioned Contracting State or a political sub-division or local authority thereof

Article 11, paragraph 3(a) of the treaty as notified.

The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.

Article 12, paragraph 3 — quoted in full to show that no equipment limb follows of the treaty as notified.

Fees for technical services shall be deemed to arise in a Contracting State when the services are rendered in that State and the payer is that State itself, a political sub-division, a local authority or a resident of that State.

Article 13, paragraph 5 of the treaty as notified.

Services that are ancillary and subsidiary, and inextricably and essentially linked, to a sale of property ;

Article 13, paragraph 7(i) of the treaty as notified.

shares, deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other State (at the time of the alienation or at any time during the twelve preceding months); or

Article 14, paragraph 4(a), as substituted by the Amending Protocol of 14 October 2015 of the treaty as notified.

an interest in a partnership, trust or other entity, deriving more than 50 per cent of its value directly or indirectly from immovable property situated in that other State (at the time of the alienation or at any time during the twelve preceding months);

Article 14, paragraph 4(b), as substituted by the Amending Protocol of 14 October 2015 of the treaty as notified.

Any benefit under this Convention shall not be granted to a person who is not the beneficial owner of the item of income.

Article 27A, paragraph 3, inserted by the Amending Protocol of 14 October 2015 of the treaty as notified.

Benefits of this Convention shall not be available to a resident of a Contracting State, or with respect to any transaction undertaken by such resident, if the main purpose or one of the main purposes of the creation or existence of such resident or of the transaction undertaken by it, was to obtain benefits under this Convention that would not otherwise be available.

Article 27A, paragraph 1, inserted by the Amending Protocol of 14 October 2015 of the treaty as notified.

provided that such persons are acting in the ordinary course of their business, and in their commercial and financial relations with the enterprise, no conditions are agreed or imposed which differ from those usually agreed between independent persons.

Article 5, paragraph 6 of the treaty as notified.

in respect of taxes on income, and taxes on capital, for fiscal years beginning on or after the first day of April, 1994

Article 29, paragraph 2(a)(ii) of the treaty as notified.

for the purposes of Article 27 (Exchange of Information) of the Convention, from the date of entry into force of the Amending Protocol.

Article Amending Protocol, paragraph Article 6(c) of the treaty as notified.

What to watch

The royalty definition has no equipment limb. Art. 12(3) covers copyright, patents, trade marks, designs, models, plans, secret formulae, processes and know-how — and stops. The words 'industrial, commercial or scientific equipment' appear in the royalty definition of every other treaty in this batch and are absent here. Equipment hire is therefore not a royalty under the India-Israel Convention; it is business profits under Article 7, and with no service PE limb and a single-limb agency test, a lessor with no fixed place of business in India will often have no PE and no Indian tax.
The FTS source rule is cumulative, not alternative. Art. 13(5): fees arise in a State 'when the services are rendered in that state **and** the payer is ... A resident of that State'. Both limbs must be satisfied. Services performed wholly outside India for an Indian payer are not sourced in India under that sentence. Contrast Art. 12(5) in the same Convention, which sources royalties on the payer test alone. This is the single most valuable provision in the treaty for an Israeli service provider and it is a qualifier that a rate table cannot show.
And article 13(7) adds A five-item exclusion list no other treaty in this batch has. Services ancillary and subsidiary and inextricably and essentially linked to a sale of property; services ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in international traffic; teaching in or by an educational institution; services for the personal use of the individual paying; and professional services as defined in Article 15. Item (i) carries a double qualifier and must not be truncated after 'ancillary and subsidiary'.
The interest exemption follows the loan, not the lender. Art. 11(3)(b) exempts interest on 'a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by' the Reserve Bank of India, the Bank of Israel, or bodies agreed by exchange of notes. A commercial lender's interest is exempt if the central bank merely guaranteed or insured the facility. Every other treaty in this batch requires the exempt institution to be the beneficial owner of the interest. Do not report this as a central-bank exemption.
And art. 11(3)(a) exempts sovereign borrowing, not sovereign lending. Interest on a bond, debenture or similar obligation of the source State's Government, political subdivision or local authority is taxable only in the recipient's State — available to any holder, including private investors. But note that Art. 11(5) disapplies paragraphs 1, 2 and 3 where the debt-claim is PE-connected, so the exemption is lost through a permanent establishment.
The capital gains article has A twelve-month look-back — the only one in this batch. Art. 14(4) as substituted in 2015 tests the more-than-50-per-cent immovable property threshold 'at the time of the alienation or at any time during the twelve preceding months', and it extends to interests in partnerships, trusts or other entities, not just shares. Pre-sale extraction of property does not defeat it, and non-corporate vehicles do not escape into the residual paragraph.
Art. 14(5) catches indirect dispositions and 'similar rights'. It applies to gains from 'the sale, exchange or other disposition, directly or indirectly, of shares ... Or similar rights in a company which is a resident of the other Contracting State'. Most treaties in this batch say simply 'gains from the alienation of shares'.
Article 27A(3) is A treaty-wide beneficial-ownership condition. 'Any benefit under this Convention shall not be granted to a person who is not the beneficial owner of the item of income.' It extends the beneficial-ownership requirement beyond Articles 10 to 13 to every article, including capital gains. No other treaty in this batch does that.
The limitation of benefits test reaches 'creation or existence' and also transactions. Art. 27A(1) catches the main purpose or one of the main purposes of the creation or existence of the resident or of the transaction undertaken by it. It has no object-and-purpose saving clause, which makes it harsher on its face than an MLI PPT — but it is limited by the words 'benefits ... That would not otherwise be available'.
This is an income and capital convention and the indian notification was issued under the wealth-tax act as well. Article 23 (Capital) allocates taxing rights over capital represented by immovable property, PE and fixed-base movable property, ships and aircraft, and all other elements of capital (residence only). Since Indian wealth-tax was abolished the Indian side of Article 23 is largely spent, but the Article remains in force and the Israeli side is unaffected.
There is no service PE limb and the agency PE has one limb only. Article 5 has seven paragraphs and no 'furnishing of services' rule; Art. 5(5) requires contract-concluding authority in the enterprise's name, with no stock-and-delivery limb and no order-securing limb; and there is no insurance PE.
The independent-agent test is an arm'S-length test, not an exclusivity test. Art. 5(6) preserves independent status provided the agent acts in the ordinary course of business and no conditions differing from those usually agreed between independent persons are imposed. Exclusive agency does not by itself destroy independence here, which is the opposite of the position under seven of the other treaties in this batch.
Other income is residence-only except for gambling winnings. Art. 22(3) confines the source-state override to 'any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any form or nature whatsoever' — the same narrow form as the Nepal treaty. Everything else outside Articles 6 to 21, including late-payment penalty charges expelled from Article 11, is taxable only in the State of residence.
The 2015 amending protocol'S exchange-of-information article took effect immediately, the rest did not. Amending Protocol Art. 6(c) gives the new Article 27 effect 'from the date of entry into force of the amending protocol', while the capital gains and limitation-of-benefits changes wait for the next Indian fiscal year or Israeli taxable period. That split matters for information requests and for transactions in the intervening months.
The original effect date for non-withholding taxes was retrospective. Art. 29(2)(a)(ii) gives the Convention effect in India for fiscal years beginning on or after 1 april 1994, two years before it entered into force on 15 May 1996. Withholding taxes ran only from the first day of the month next following entry into force.
Protocol paragraph 1 freezes the head-office expense rule to the law as at 29 january 1996 and obliges the States to consult if either later restricts such deductions further. It is now the only surviving paragraph of the original Protocol — paragraphs 2 and 3 were omitted by the Amending Protocol.

What this page does not tell you. The omitted provisions were not read, and one of them matters. Amending Protocol Article 2 omitted paragraphs 3 and 4 of article 24 (Elimination of Double Taxation), and Article 5 omitted paragraphs 2 and 3 of the original protocol. Their pre-omission text was not obtained. Given their position in an elimination article, the omitted Art. 24(3) and (4) were most probably tax-sparing or deemed-paid credit provisions, but that is inference and is not established. Anyone advising on a period before the Amending Protocol took effect needs those paragraphs. The date of entry into force of the 2015 amending protocol is not stated anywhere in the material read. Its Article 6 keys entry into force to 'the date of the last notification', and only the Indian notification giving it effect (No. S.O. 441(E) [No. 10/2017] dated 14-2-2017) is recorded. Because Art. 6(c) gives the new exchange-of-information article effect from that date with no lead-in, while Art. 6(a) and (b) wait for the next fiscal year or taxable period, the exact date is needed to fix when each change began. Whether the MLI additionally modifies this treaty is not established. No Synthesised Text exists in the sources used here, and every amendment marker in the notified text traces to the bilaterally negotiated 2015 Amending Protocol rather than to the MLI. Notably absent from the current text are: any beps preamble recital; any MLI Art. 4 dual-resident competent-authority rule (Art. 4(3) still uses place of effective management); any MLI Art. 7(1) principal purposes test with its object-and-purpose saving (Art. 27A(1) is a differently worded main-purpose test without one); and any MLI Art. 12 to 15 permanent establishment changes. Their absence from the notified text is not by itself proof that neither State adopted them. No exchange of notes specifying additional governmental agencies or lending institutions under Art. 11(3)(b)(iii) was found, and none is reproduced in this record. That list may be empty, leaving the exemption confined to loans and credits made, refinanced, guaranteed or insured by the Reserve Bank of India and the Bank of Israel. Art. 13(5)'s cumulative source rule is not glossed anywhere. Where services are performed partly in India and partly outside, the Convention says nothing about apportionment, and no competent-authority guidance on the point was found. Art. 13(7)(i) requires services to be 'ancillary and subsidiary, and inextricably and essentially linked, to a sale of property' but supplies no definition or example for either limb, and there is no memorandum of understanding of the kind that accompanies the equivalent US treaty provision. Art. 5(3) omits 'installation' from the construction limb and supplies no catch-all. Whether a pure installation project falls outside the six-month threshold is unresolved on the face of the text. Articles 24 (Elimination of Double Taxation, as it now stands), 25 (Non-Discrimination) and 26 (Mutual Agreement Procedure) were read only in outline; in particular Art. 26 refers to resolution 'through a Commission consisting of representatives of the competent authorities of the Contracting States', whose composition and procedure are not established here. The Convention has no assistance-in-collection article. India's wealth-tax has been abolished, but Article 2(3)(a)(ii) still lists it and Article 23 (Capital) remains in the Convention. Whether the Indian side of Article 23 has any continuing operation, and whether any successor levy would be an 'identical or substantially similar tax' under Art. 2(4), is not addressed anywhere in the instrument. Art. 29(2) says the Convention enters into force 'on the date of the letter of such notifications', evidently a slip for 'the later'. Whether any corrigendum has issued is not established.

The India–Israel tax treaty