HK Doesn't Tax Your Indian Income. The Treaty Says Pay Less.
TL;DR
Hong Kong's territorial tax system ignores your Indian income. India's DTAA with HK caps dividends at 5% and interest at 10%. Most HK Indians claim neither. Big mistake.
By Vipul Sharma, Founder
Reviewed by Preetesh Maloo, Chartered Accountant, NRI Tax Partner
Territorial tax: HK's gift to you, and why India's 30% makes no sense
Hong Kong operates on a territorial tax system. The principle is simple: only income sourced IN Hong Kong is taxed. Your Indian FD interest, dividends, mutual fund gains, rental income, all sourced in India, not Hong Kong. HK doesn't care. Not taxed. Not reported. Not relevant.
This is fundamentally different from the US, UK, or Germany, where residents pay tax on worldwide income. In Hong Kong, your Indian income is genuinely invisible to the IRD (Inland Revenue Department).
But India still sees you as an NRI and deducts 30% TDS on FD interest and 20% on dividends by default. Since HK doesn't tax this income, there's no Foreign Tax Credit to offset the Indian TDS on the other side. What India takes is simply gone.
The India-Hong Kong DTAA (signed 2018) exists specifically to fix this imbalance. Dividends: 5% instead of 20%. Interest: 10% instead of 30%. These aren't theoretical numbers. They're your money being returned to you.
5% dividends: among the best DTAA rates India offers
Let's talk about dividends specifically, because that's where Hong Kong NRIs have the biggest edge.
India's default TDS on dividends for NRIs is 20%. The India-HK DTAA brings it down to 5%. That's a 75% reduction. Only Saudi Arabia matches this rate among India's major DTAA partners.
If you hold Indian stocks directly. Infosys, TCS, HDFC Bank, Reliance, and receive ₹2,00,000 in annual dividends:
Default TDS: ₹40,000
DTAA 5%: ₹10,000
Annual saving: ₹30,000
For interest income, the 10% rate saves you 20% on every rupee of FD interest. A ₹20 lakh NRO FD at 7%:
Default TDS: ₹42,000
DTAA 10%: ₹14,000
Annual saving: ₹28,000
Combined dividend + interest saving: ₹58,000 per year. Over 5 years with Section 244A interest on past refunds: approximately ₹3.5 lakh.
The Indian community in Hong Kong numbers around 35,000-40,000. Mostly in finance, trading, and professional services. High-income earners with substantial Indian portfolios. The unclaimed DTAA money in this community is enormous.
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The 2018 DTAA: new treaty, old ignorance
The India-Hong Kong DTAA was signed in March 2018 and came into force in 2019. It's one of the newest DTAAs India has signed. And that newness is a problem.
Older treaties. India-US (1989), India-UK (1993), India-Singapore (2005), have had decades for awareness to build, for CAs to learn them, for NRIs to hear about them. The India-HK treaty has barely been around 7 years.
Many Indian banks and AMCs are still unaware it exists. We've seen cases where NRIs submit their HK TRC and Form 10F to their bank's NRI desk, only to be told “India doesn't have a DTAA with Hong Kong.” Wrong. It's been in force since 2019.
Even CAs sometimes miss it. If you search “India DTAA countries” on most tax advisory websites, Hong Kong is frequently omitted from the list. It's treated as an afterthought despite having genuinely excellent rates.
Knowledge gap = opportunity. If you're among the first Hong Kong NRIs to claim DTAA systematically, you're recovering money that your peers don't even know they're losing.
IRD Form IR1314B: your TRC process in Hong Kong
Hong Kong's Inland Revenue Department issues TRCs through Form IR1314B (Application for Certificate of Resident Status, individual, double tax arrangement with India). Despite HK's territorial system, the IRD will certify your resident status for DTAA purposes.
Process:
1. Download Form IR1314B from the IRD website (ird.gov.hk)
2. Fill in your personal details, the relevant DTAA (India), and the income types you're claiming for
3. Submit to the IRD by post or in person at Revenue Tower, Wan Chai
4. Processing: 3-4 weeks
5. Cost: HKD 85
Eligibility: you must be a Hong Kong tax resident. This generally means you ordinarily reside in HK or have been in HK for 180+ days in the relevant year. Having a valid HK ID card and filing Hong Kong salaries tax returns strengthens your case.
One nuance: the IRD issues the TRC for specific income types. Make sure your application covers interest, dividends, and capital gains, don't limit it to just one category.
With your TRC in hand, file Form 10F / Form 41 on India's portal, submit both to your Indian bank and AMC, file ITR with treaty rates, and for past years, file condonation under Section 119(2)(b). The process is identical to any other country. The rates just happen to be among the best India offers.
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The exceptions that change the answer
Where the general rule stops applying to you
Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.
TDS on NRO account interest
Right now: 30% plus surcharge and cess
Where it works differently
- A valid TRC and Form 10F (Form 41 from 1 Apr 2026) are furnished
- The treaty rate applies, commonly 10-15% under Article 11.
- s.90(2) gives the more beneficial of treaty or Act.
- No PAN is furnished
- s.206AA imposes at least 20%, but Rule 37BC allows escape by furnishing name, address, TIN and TRC. Courts have also held s.206AA cannot override a treaty rate.
- Rule 37BC + settled case law.
- Claiming the treaty rate at source
- The s.115A(5) filing exemption is lost, so an Indian return becomes necessary.
- That exemption requires TDS at not less than the s.115A rate.
- The account is NRE or FCNR instead
- Interest is exempt and no TDS applies, while the holder is a FEMA non-resident.
- s.10(4)(ii) and s.10(15)(iv)(fa).
Commonly got wrong
- NRO interest TDS is 30%. Incomplete. Surcharge and 4% cess sit on top, so the effective rate is higher.30% plus surcharge and cess, around 31.2% at the base level.
- You can file Form 15G/15H to stop NRO TDS. Those are resident-only declarations. An NRI filing one makes a false declaration.Use Form 13 (Form 128 from 1 April 2026), or claim the treaty rate with a TRC.