Under the terms of the Treaty of Sinchula, signed on 11 November 1865, Bhutan ceded territories in the Assam Duars and Bengal Duars, as well as the eighty-three square kilometer territory of Dewangiri in southeastern Bhutan, in return for an annual subsidy of 50,000 rupees.

[4] By the turn of the century, continuing geopolitical developments raised the question of a new treaty.

Ugyen Wangchuck had consolidated power as Penlop of Trongsa and was unanimously elected monarch by government and religious cadres just two years earlier, in December 1907.

[8][9][10] The Treaty of Punakha accompanied other contemporary agreements that had the effect of sharing profits from elephant hunting inequitably in Britain's favor;[1] assigning land in Motithang (Thimphu Province) and a hill station between Chukha and Thimphu to the British; and assigning a portion of British Kalimpong to Bhutan, which later became Bhutan House owned by the Dorji family.

[12][13] Kazi Ugyen Dorji of the Dorji family settled the land and took advantage of the lucrative trade routes through Kalimpong, and by 1898 assumed the roles of Trade Agent and mediator between the British Empire and Tibet.

Topgay and Nehru established Bhutan–India relations, prompted by a growing security concern over Communist China.

Under this agreement, India returned the land around Deothang, subject of part of the 1865 Anglo-Bhutanese War.

Bell, Political Officer in Sikkim, in virtue of full powers to that effect vested in him by the Right Honourable Sir Gilbert John Elliot-Murray-Kynynmound, P.C., G.M.S.I., G.M.I.E., G.C.M.G., Earl of Minto, Viceroy and Governor-General of India in council, and on the other part by His Highness Sir Ugyen Wangchuck, K.C.I.E., Maharaja of Bhutan.

of the Sinchula Treaty of 1865 has been revised and the revised Article runs as follows: – Done in quadruplicate at Punakha, Bhutan, this eighth day of January in the year of our Lord one thousand nine hundred and ten, corresponding with the Bhutia date, the 27th day of the 11th month of the Earth-Bird (Sa-ja) year.