Artikel 11

1. Interest arising in one of the two States and paid to a resident of the other State may be taxed in that other State.
2. However, such interest may also be taxed in the State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2, interest arising in one of the two States shall be taxable only in the other State to the extent that such interest is derived by:
(i) the Government of the other State, including political subdivisions and local authorities thereof; or
(ii) the Central Bank of the other State; or
(iii) a financial institution owned or controlled by the Government of the other State, including political subdivisions and local authorities thereof; or
(iv) any resident of the other State with respect to debt-claims guaranteed or insured by the Government of the other State including political subdivisions and local authorities thereof, the Central Bank of the other State or any financial institution owned or controlled by that Government.
4. Notwithstanding the provisions of paragraph 2, interest arising in one of the two States may also be taxed in the State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other State and if the interest is paid on a loan made for a period of more than 2 years or is paid in connection with the sale on credit of any industrial, commercial or scientific equipment, the tax so charged shall not exceed 5 per cent of the gross amount of the interest.
5. The competent authorities of the two States shall by mutual agreement settle the mode of application of paragraphs 2, 3 and 4.
6. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and, in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. However, the term “interest” does not include income dealt with in Article 10.
7. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the interest, being a resident of one of the two States, has in the other State in which the interest arises a permanent establishment with which the debt-claim from which the interest arises is effectively connected. In such a case, the provisions of Article 7 shall apply.
8. Interest shall be deemed to arise in one of the two States when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of one of the two States or not, has in one of the two States a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.
9. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each State, due regard being had to the other provisions of this Agreement.