Navigating India–Japan DTAA and SSA: Tax Reliefs for Tech Pros

(TOKYO, OSAKA, NAGOYA, YOKOHAMA) Japan’s efforts to fill high-skilled roles are pushing new tax and pension clarifications into the spotlight for Indian nationals working and studying across the country. As the India–Japan workforce grows—now more than 45,000 people across major cities—officials and advisers are pointing to two long-standing treaties that shield income and retirement savings from being hit twice: the India–Japan Double Taxation Avoidance Agreement and the India–Japan Social Security Agreement. Together they are shaping paychecks, pension choices, and compliance steps for engineers, researchers, and students in 2025.

The two treaties: purpose and basics

The Double Taxation Avoidance Agreement (DTAA) took effect on 29 March 1990, with a modernizing protocol added in 2016 to update definitions and anti-abuse rules. It:
– Decides which country taxes which type of income.
– Uses credits to ensure the same income is not taxed twice.

The India–Japan Social Security Agreement (SSA), in force since 1 October 2016,:
– Prevents double pension contributions.
– Allows work periods in both countries to be counted together for pension eligibility.

Officials say the treaties work best when residents keep simple but clear records: a Tax Residency Certificate (TRC), proof of taxes paid, and evidence supporting any treaty claim.

How employment income is taxed

For salaried employees on Japan payroll, the core rule is straightforward: salary is taxed where the work is done. This typically places day-to-day employment income in Japan’s tax net, with India providing relief if the individual qualifies as a non-resident for that financial year.

Treaty articles also handle cross-border income such as:
– Dividends, interest, royalties, and technical fees, generally taxed at source at 10%–15%.
– Investors often benefit from lower withholding—commonly 10%—which supports capital flows.

The students and trainees article provides further relief:
– Scholarships or grants from abroad are commonly tax-exempt in the host country during study.
– Professors and researchers on short-term assignments can qualify for temporary relief of up to two years.

Practical examples and key rules

• An Indian software engineer in Tokyo who earns rent on a home in Hyderabad pays India tax on that rent; Japan then gives a foreign tax credit under the treaty to avoid double taxation.
• For business owners, the rule on “permanent establishment” is decisive: profits are taxed in the other country only if there is a fixed place of business or a dependent agent there.
• Capital gains generally remain taxable where the asset is located, so gains from selling Indian property are taxed only in India.

Both countries share tax data under the Common Reporting Standard (CRS), so advisers stress foreign income must be reported correctly even if relieved by treaty provisions.

Documents and steps to access treaty relief

Accessing relief requires paperwork but it’s straightforward when done properly. Typical documents include:
– Tax Residency Certificate (TRC)
– In India: apply using Form 10FA, TRC issued on Form 10FB (Form 10FA, Form 10FB).
– In Japan: work with the National Tax Agency for treaty-related certifications and read English guidance (National Tax Agency guidance).
– Proof of taxes paid:
– Japan’s Gensen-Choshu-Hyo (salary withholding statement)
– India’s Form 16 and ITR acknowledgment
– If claiming treaty relief while filing in India, complete Schedule TR.

Tax planners note: if someone has lived in Japan for less than five years, the Japanese “non-permanent resident” rules may limit taxation on foreign income to what is brought into Japan during the year.

Important: Keep years of withholding statements and TRCs—they are the central evidence for treaty claims.

Social Security Agreement: short-term detachment and portability

The SSA has immediate cashflow benefits:
– Detachment clause: Indian employees sent to Japan for a short-term assignment of up to five years continue contributing only to India’s EPFO and do not pay into Japan’s Employees’ Pension Insurance (Kosei Nenkin).
– This saves both worker and employer significant amounts; industry estimates typical mid-level deployments save about ₹6–8 lakh annually in social insurance costs.

For longer stays, the SSA provides totalisation, which:
– Adds contribution periods in both countries to help workers reach pension eligibility even when their careers are split.

Portability and exit options:
– People can receive Japanese pension payments in India once eligible.
– If Japan service is less than 10 years, departing workers can apply for a Lump-sum Withdrawal Payment (LWP) to reclaim contributions.
– The LWP must be filed within two years of leaving Japan. Application details are on the Japan Pension Service site: Japan Pension Service: Lump-sum Withdrawal Payment.

Advisers say many short-term assignees rely on LWP when their stay ends before the 10-year mark.

Students, researchers, and academic mobility

With more Indian scholars going to Japan, treaty provisions are crucial for budgeting:
– University scholarships (including government-backed awards) are typically tax-free under the treaty’s student article when received for study.
– Post-doctoral funding and research grants from India or international bodies often enjoy the same protection during study.
– Universities urge students to keep letters showing the source and purpose of grants; these documents support treaty positions during tax reviews.
– Visiting professors benefit from limited-term relief that eases the cost of short academic stays, facilitating international research exchanges.

Students in 2025 top 15,000, making these rules central to living-cost planning and first-job payroll questions like withholding and residency proof.

Residency rules and “tie-breaker” tests

Residency definitions can be confusing for people splitting time:
– Japan considers someone a resident if they stay for at least one year or have a permanent home there.
– India treats someone as a non-resident if they spend fewer than 182 days in India in the financial year.

When both countries could claim residency, the treaty’s tie-breaker looks at:
1. Where the person’s permanent home is.
2. Where their centre of vital interests (main personal and economic ties) lies.
3. Where they habitually reside.

Because India’s tax year runs April–March and Japan’s runs January–December, cross-border earners often map both calendars to avoid filing gaps or missed credits.

Employer practices and industry impact

Large employers cite the SSA as central to mobility planning:
– Major Indian IT firms rely on the five-year detachment to keep contributions in EPFO and reduce costs.
– HR teams say detachment makes short-term international moves more attractive to mid-career staff who want experience without losing take-home pay to a second pension scheme.

Analysis (VisaVerge.com) suggests the combined treaty framework has:
– Reduced friction for Indian tech teams in Japan.
– Given companies more room to scale onsite projects needing cross-border staff.

Policy advisers are watching initiatives like Digital Partnership 2025:
– Any extension of SSA-style relief to startup founders and self-employed professionals would help newer sectors where talent works on short, intense assignments.

Currently, the SSA covers:
– Japan’s National Pension (Kokumin Nenkin) and Employees’ Pension Insurance (Kosei Nenkin).
– India’s EPFO.
– It grants equal treatment to Indian workers under pension rules, and enables retirees who earned eligibility in Japan to receive payments in rupees back home.

Anti-abuse rules and contract practice

Treaty guardrails added in 2016 tightened definitions and anti-abuse clauses. Their effects include:
– Maintaining lower withholding rates on royalties and technical service fees—often 10%—for genuine cross-border work.
– Protecting engineers and consultants who bill specialized services across borders, especially where no permanent establishment is created.

Advisers emphasize:
– Careful contract drafting and detailed documentation are regular practices for cross-border service work to ensure treaty benefits apply.

Practical checklist and final takeaways

For cross-border earners, advisers recommend keeping:
– TRC and associated application forms (Form 10FA/10FB for India).
– Annual withholding statements (Gensen-Choshu-Hyo in Japan, Form 16 in India).
– ITR acknowledgments and Schedule TR if claiming treaty relief in India.
– Letters evidencing scholarship or grant purpose and source (for students/researchers).
– Records of departure dates and LWP filings if applicable.

Key takeaway: The DTAA protects current income, the SSA protects retirement, and both depend on simple, well-kept evidence. While paperwork is unavoidable, the process is predictable: TRCs, withholding statements, and schedule disclosures are routine, and tax offices on both sides are accustomed to India–Japan cross-border claims.

For the Indian community spread across Tokyo, Osaka, Nagoya, and Yokohama, that predictability is often the most important element in making a new country feel like home.