About DTAA in Singapore and India for Capital Gains and Dividends

Great question! Understanding how the India-Singapore DTAA (Double Taxation Avoidance Agreement) applies to capital gains and dividends is key when you’re incorporating in Singapore but repatriating income to India.

Here’s a clear breakdown:

1. Capital Gains Tax under India-Singapore DTAA

Singapore side:
Singapore does not tax capital gains. So, your Singapore company selling assets will likely not pay any capital gains tax in Singapore.
India side:
Under the DTAA, capital gains arising from the transfer of assets may be taxed in the country where the asset is located or where the company is resident.
- If the asset is located in India (like property or shares of Indian company), India can tax capital gains on the transfer.
- If the asset is outside India (e.g., shares of a foreign company), India generally cannot tax capital gains of a foreign company.
When bringing money back to India:
If the capital gain is already taxed (or not taxable) in Singapore, repatriation of those funds as dividends or capital returns does not attract additional capital gains tax in India on remittance itself.
However, when you, as an individual resident in India, receive this money, tax implications depend on the nature of receipts (dividends or capital gains distribution).

2. Dividend Tax under India-Singapore DTAA

Dividends paid by Singapore company to Indian resident:
- Singapore does not tax dividends paid to shareholders.
- India taxes dividends received by resident individuals at applicable tax rates (15% under section 115BBDA or as per normal slab rates depending on case).
- Under DTAA, India has the primary right to tax dividends received by an Indian resident from Singapore.
- Singapore may withhold tax, but since dividend tax is zero in Singapore, no withholding applies.
Double Tax Relief:
Since Singapore does not tax dividends, there is no foreign tax credit required for Indian resident receiving dividends from Singapore.

Summary Table:

Income Type	Taxation in Singapore	Taxation in India (Resident Individual)	DTAA Impact
Capital Gains	No capital gains tax	Taxable if asset is in India or Indian shares sold	India has taxing rights if asset in India; No double tax if Singapore doesn’t tax
Dividends	No dividend tax	Taxable as income (dividend income)	India taxes dividends; Singapore no withholding

What about your personal tax?

If you repatriate capital gains as dividends from Singapore company, you pay tax in India on the dividend income (not capital gains).
If you sell your shares in Singapore company and bring money to India, it’s a capital gain for you as an individual and taxable in India as per Indian laws.

Important:

You should maintain proper documentation of taxes paid in Singapore and India.
Also consider whether your Singapore company qualifies as a Passive Foreign Investment Company (PFIC) or similar for Indian tax purposes.
Consult a professional for detailed planning based on your exact structure.