Central, Kowloon, Sai Kung: India's 2024-26 changes for Hong Kong Indians
TL;DR
The India-Hong Kong DTAA caps interest at 10% under Article 11 and dividends at 5% under Article 10. None of that changed in 2024-26. Four India-side rules did, including the Section 148 faceless mandate and Budget 2024 LTCG.
By Vipul Sharma, Founder
Reviewed by Preetesh Maloo, Chartered Accountant, NRI Tax Partner
The treaty rate: 10% interest, 5% dividends
The India-Hong Kong DTAA, signed in 2018, caps interest tax at 10% under Article 11 and dividends at 5% under Article 10. None of those rates moved in 2024-26.
Default Indian TDS for non-residents under Section 195 is 30%. Without TRC + Form 10F on file, your Indian bank deducts 30% on NRO interest. The gap to the 10% treaty rate is 20 percentage points.
A Central-based banker with a ₹40 lakh NRO FD at 7% earns ₹2.8 lakh annual interest. At 30% default: ₹84,000 lost. At 10% treaty: ₹28,000. Annual gap: ₹56,000. Over 5 Assessment Years: ₹3.36 lakh of principal recoverable, with no Section 244A interest on a condoned claim.
The 5% dividend rate ties Hong Kong with Saudi Arabia and Qatar (post-2025) for the lowest dividend rate in any India treaty. For Hong Kong-Indian shareholders of Indian companies, this is the structural advantage.
The 4 India-side shifts Hong Kong Indians missed
Section 148 reopening window cut to 3 years 3 months (small additions) or 5 years 3 months (large additions ≥ ₹50 lakh). Effective 1 September 2024 per Finance (No.2) Act 2024.
Section 151A faceless mandate. The Supreme Court ruling of July 2025 confirmed JAO-issued Section 148 notices are void. Faceless reassessment under Section 151A read with the Faceless Assessment Scheme is the only valid route (Section 144B governs the underlying assessment proceeding).
Budget 2024 LTCG. NRI property sales taxed at 12.5% flat without indexation. Effective 23 July 2024. The 20%-with-indexation election added by Finance (No.2) Act 2024 is reserved for resident individuals/HUFs only, NRIs do not get the carve-out.
Black Money Act 2015 safe harbour raised to ₹20 lakh for movable foreign assets, 1 October 2024 (Finance (No. 2) Act 2024 amendment). Your HSBC Premier balance, your Hang Seng account, your Tiger Brokers portfolio, all under ₹20 lakh equivalent are no longer reportable on Schedule FA.
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How the Hong Kong IRD TRC flows
Hong Kong residents apply for TRCs through the IRD eTAX portal; the certificate issued is Form IR1314B.
Documents: Hong Kong Identity Card (HKID), proof of address (utility bill or bank statement under 3 months old), most recent IRD tax return, and a written declaration of the income to be covered by the TRC.
Cost: free. Timeline: 4 to 6 weeks. The IRD verifies you've met the substantial-presence test (more than 180 days in two consecutive years, or more than 300 days in any rolling year, with substantial economic ties to Hong Kong).
The TRC covers a calendar year. Most Hong Kong NRIs renew every January.
The TRC must contain six things under Rule 75 (Rule 21AB until 31 March 2026). The IRD's Form IR1314B includes all six fields. Form 10F online filing on incometax.gov.in takes 5 minutes once the TRC is in hand.
The 5% dividend rate: a structural advantage
Hong Kong's 5% dividend rate is one of the most favourable in any India tax treaty. The advantage compounds for high-net-worth Indian shareholders.
For a Hong Kong-Indian holding ₹2 crore of Indian equity yielding 2% in annual dividends, that's ₹4 lakh. At the default 20% rate (applicable to non-resident dividends without DTAA): ₹80,000 TDS. At the 5% treaty rate: ₹20,000 TDS. Annual saving: ₹60,000.
For private banking clients with ₹5 crore+ portfolios concentrated in dividend-paying Indian large-caps, the 5% rate alone justifies the Hong Kong tax-residency setup costs. Compare to a UK or US shareholder paying 10 to 15% dividend tax on the same portfolio.
The 2018 treaty made Hong Kong one of the most NRI-favourable jurisdictions for Indian equity holdings. Pair that with Hong Kong's zero local tax on foreign-source dividends, and the post-tax yield differential is meaningful.
Past-year recovery: the math for Hong Kong Indians
Section 119(2)(b) gives 5 Assessment Years of rolling lookback. Every April, the oldest year drops out.
A Hong Kong NRI with a ₹50 lakh NRO FD at 7% over 5 Assessment Years paid ₹6.30 lakh in default 30% TDS. At the 10% treaty rate, it should have been ₹2.10 lakh. Gap: ₹4.20 lakh.
Add Section 244A interest at 6% simple per delayed year. Total recovery range: ₹4.85 to ₹5.30 lakh on a clean 5-AY claim.
For Hong Kong-Indian shareholders also recovering excess dividend TDS at the 5% rate, the recovery is straightforward because Hong Kong's tax-free dividend treatment means there's no foreign-tax-credit interaction. The full Indian recovery flows back to the Hong Kong-resident account untouched.
We coordinate with Hong Kong tax representatives when the IRD requires supporting documentation for the Indian condonation filing.
What we actually do for Hong Kong Indians
Upload your 26AS or AIS. We read every TDS line, apply the 10% Article 11 interest rate and the 5% Article 10 dividend rate, and quote the recoverable amount in HK dollars.
If you want us to take it on, a Hong Kong-specialist CA files the current-year ITR at 10% (interest) and 5% (dividends), plus a Section 119(2)(b) condonation for past years. We handle AO correspondence under Section 288 so you don't fly to Mumbai.
Our fee is success-fee based, so you pay only when money actually returns to your NRO account. If we recover zero, you pay zero. Form 10F / Form 41 renewal after that is a small annual flat fee, no NRI markup. We quote the exact numbers on the call.
If you'd rather book a free CA appointment first and ask 5%-dividend-specific questions, that's free, no card, no commitment, 15 minutes.
Pricing model and what's included
Our fee model is contingent, you pay nothing if we recover nothing. The recovery side is success-fee based under Section 119(2)(b) condonation, applied only after the refund credit lands in your Indian bank account. We quote the exact percentage on the call.
For a typical Hong Kong NRI with ₹40 to 60 lakh of NRO holdings and 4 to 5 Assessment Years of overpaid TDS, the recoverable amount runs ₹3.5 to 5.5 lakh. Our success-fee slice on that range is a small share of what comes back, quoted exactly on the call.
Form 10F renewal in subsequent years is a low flat fee. TRC liaison with the Inland Revenue Department and the annual NRI compliance retainer (all 14 calendar deadlines covered) are both transparently priced, exact amounts discussed on the call.
We don't take any product commission. No bank, no AMC, no insurance company pays us. The math we run is the math you'd run if you had time. That's the only thing we sell, time.
Frequently asked questions
Q: I'm a Hong Kong permanent resident, not a citizen. Does the DTAA still apply?
A: Yes. The DTAA applies based on tax residency, not citizenship or permanent-residency status. As long as you have a valid IRD TRC and you've passed the substantial-presence test, the treaty rates apply.
Q: My HK employer says I'm 'Hong Kong-based for tax purposes'. Does that work for the IRD TRC?
A: Employer letters don't bind the IRD. You need a formal certificate from the IRD itself, issued via Form IR1314B. The HK employer's view is informational, not authoritative for treaty purposes.
Q: Hong Kong-China handover: is the DTAA secure long-term?
A: Yes. Hong Kong's Special Administrative Region status preserves its independent tax system. The 2018 India-Hong Kong DTAA is between India and Hong Kong directly, separate from the India-China treaty. Any change would need a new protocol, which hasn't been signaled.
Q: I'm thinking of moving to Hong Kong from Singapore. Are the treaty math implications meaningful?
A: Yes. Singapore caps dividends at 10 to 15%, Hong Kong at 5%. For dividend-heavy portfolios the difference is 5 to 10 percentage points annually. Singapore wins on Article 13 grandfathering for pre-April-2017 equity. Hong Kong wins on dividends and a slightly simpler TRC process. Run the math through your specific portfolio mix before deciding. Book free CA appointment to walk through it.
Country guides mentioned
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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.
NRO account: what it costs and what it caps
Right now: Interest taxed at 30% plus surcharge and cess; repatriation capped at USD 1 million a financial year
Where it works differently
- A TRC and Form 10F (Form 41 from 1 Apr 2026) are furnished
- The treaty rate applies to the interest, commonly 10-15% under Article 11 instead of 30% plus surcharge.
- s.90(2). This is the single largest recurring recovery item for most NRIs.
- Remitting out
- Form 15CA is needed, plus Form 15CB from a CA where the remittance is chargeable and above Rs 5 lakh in the year.
- Rule 37BB.
- Joint holders
- The USD 1 million ceiling is per person per financial year, so joint holders each have their own.
- FEMA 13(R).
Commonly got wrong
- NRO interest is taxed at 30%. Incomplete. Surcharge and 4% cess sit on top, and a treaty can cut it to 10-15%.30% plus surcharge and cess by default, but 10-15% under most treaties if you hold a TRC and file Form 10F.
Condonation of delay window for refund and loss claims
Right now: 5 years from the end of the assessment year
Where it works differently
- The claim arises from a court order
- Different limitation applies. The period the matter was pending is generally excluded.
- Para in Circular 11/2024.
- Deciding authority
- Tiered by claim amount across Principal Commissioner, Chief Commissioner and CBDT.
- Circular 11/2024 monetary limits.
Commonly got wrong
- The condonation window is six years. Circular 9/2015 was superseded on 1 October 2024.Five years, per Circular 11/2024.
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.
Treaty rate on Indian dividends
Right now: Domestic rate 20% plus surcharge and cess; most treaties cap it at 10-15% under Article 10
Where it works differently
- A TRC and Form 10F are furnished to the registrar or company
- The treaty rate applies at source. Without them the full 20% plus surcharge and cess is deducted and you recover it by filing.
- s.90(4) and (5).
- The exact rate matters
- It is per treaty, not a single number. Check the country entry. Some treaties are 10%, some 15%, and Italy's dividend article can be WORSE than the domestic rate.
- Never quote one figure across countries.
- Claiming the treaty rate
- The s.115A(5) filing exemption is lost, so an Indian return becomes necessary.
- That relief needs TDS at not less than the s.115A rate.
Commonly got wrong
- The DTAA rate on dividends is 10%. It varies by treaty. Quoting one number across countries is wrong, and at least one treaty is worse than domestic law.Check your country's Article 10 rate, commonly 10% or 15%, against 20% plus surcharge and cess under domestic law.