They agreed to cut a withholding tax on fees on technical services - such as the value of cross-border technology transfers between companies, technical assistance and software development - and a tax on royalties to 10 percent from the current 20 percent.
"Given the importance of Japan-India economic relations, this aims at promoting investment between the two," Tanigaki said.
Software-related industries in both countries have asked for the tax to be abolished. A Japanese official told Reuters that Japan was ready to abolish the tax, while India wanted to keep it in place.
Under the agreement, withholding taxes on dividends and interest earned from cross-border investment will also be reduced to 10 percent.The current treaty has been in effect since in 1989.