Does every tax treaty have an arbitration clause?
No. An arbitration clause exists in some treaties and not in others, so the first question in any dispute is what the text in force between those two countries actually says. Where the clause is absent, the mutual agreement procedure still runs, but the two competent authorities are obliged only to endeavour to reach agreement. They can fail, and nothing in the treaty then forces an answer. Where the clause is present, an issue they could not settle can be referred to binding arbitration, which turns an open-ended negotiation into something with an end. Read the article before planning the file, because the shape of the whole dispute depends on whether that backstop is there.
What happens if the two tax authorities never agree on my case?
Without an arbitration clause the case simply stays unresolved, and the double taxation stays where it fell. You are left with domestic remedies in one or both countries, and those have their own deadlines, which may well have passed while the mutual agreement case was running. Where an arbitration clause is present, the issue the authorities could not settle can be put to arbitrators whose decision binds them. That is why we keep domestic objection rights alive in parallel wherever the treaty has no arbitration article. It is the only backstop available, and it is lost by inattention rather than by decision.
Is an arbitration decision binding on me as well?
The usual design is that the decision binds the two tax authorities while you keep a choice about whether to accept it. Accepting closes the issues that were submitted, and with them the domestic arguments you were holding on those same points. Refusing leaves you back with domestic remedies, if any still survive. So the decision is not only whether to arbitrate but what to do with the result, and that is a comparison between the arbitrated outcome and what a domestic appeal could still realistically produce. We put that comparison in writing before the deadline to accept, not after it.
Can I ask for arbitration instead of the mutual agreement procedure?
No. Arbitration under a treaty is a backstop to the mutual agreement procedure rather than an alternative to it. The case has to be presented to a competent authority, and the authorities have to have failed to resolve it within the period the treaty sets, before the arbitration article opens at all. Going early achieves nothing except lost time. The practical consequence is that the quality of the mutual agreement submission matters enormously, because the issues that eventually reach arbitration are the issues as they were framed there, by you, at the outset.
Do I still have to pay the disputed tax during arbitration?
Usually yes, unless domestic law or an agreed hold says otherwise. A treaty dispute mechanism divides a taxing right between two states. It does not by itself suspend either country's power to collect, and interest continues to run on its own terms in each of them. That is one reason a case can be worth settling rather than arbitrating. It is also why we deal with collection separately, in the country doing the collecting and under that country's own rules, rather than assuming the treaty process holds the demand off while it runs.
How long do I have to request arbitration on my case?
The window is set by the arbitration article itself, and it runs from an event the article defines rather than from the day the problem became obvious to you. That is the part people miss. The clock is usually tied to when the case was presented to a competent authority, so presenting late shortens nothing and delays everything. Before anything else we fix the dates: when the assessment was issued, when the case was presented, and what the article measures from. Those dates decide whether arbitration is available to you at all.
Do foreign shares, ESOPs and RSUs count as foreign assets in an Indian return?
Yes. Equity held directly, shares acquired under an employee plan once they have vested to you, units in foreign funds, the custodial account they sit in and the foreign bank account that funds it are all disclosable by a resident — separately, with acquisition cost, peak value and income for the year. This is where returning employees of multinational groups most often have a gap, because the plan administrator reports to the employer, not to you. See Schedule FA reporting.
Is money received in India from abroad taxable?
Receiving your own money is not income, and a gift from a specified relative is exempt however large. Two things do bite. A gift from someone outside that relative list is taxable to the recipient once the year's receipts pass the threshold in the gift provisions. And money that is really payment for something — fees, rent, interest, a share of profit — is taxed as that income whatever the bank narration says. The paperwork should match the substance. See gifting money to family in India.
