The treaty, which updates an accord of 1949, has come into effect with the exchange of Instruments of Ratification by the two countries in Thimpu on March 2, External Affairs Ministry said here today.
The updated treaty was signed here by Bhutan King Jigme Khesar Namgyel Wangchuk and External Affairs Minister Pranab Mukherjee on February 8.
The revision of the accord involves amendment to several clauses, including Article 2 and 4 which will enable Bhutan to conduct its foreign policy more independently but while keeping India's security interests in mind.
The original treaty, signed in Darjeeling on August 8, 1949, contained nine clauses while the new one has 10, including a provision that neither country will allow its territories to be used for activities inimical to the other.
Article 2, which says that Bhutan will be guided by India's advice while conducting its foreign policy, has been replaced by a language that speaks of cooperation. A close consultative mechanism will be set up in this regard.
Amendment of Article 4 would allow Bhutan to import military equipment from other countries without India's consent. However, the clause emphasises that while doing so, Thimpu will keep India's interests in view.
"The Government of India agrees that the Government of Bhutan shall be free to import, from or through India into Bhutan, whatever arms, ammunition, machinery, warlike material or stores as may be required or desired for the strength and welfare of Bhutan," the Treaty says.
This arrangement shall "hold good for all time as long as the Government of India is satisfied that the intentions of the Government of Bhutan are friendly and that there is no danger to India from such importations."
Significantly, the treaty has been updated as Bhutan is preparing to usher in democratic system in the country by unveiling its new Constitution next year.
The revised treaty was signed after the 26-year-old Monarch held talks with Prime Minister Manmohan Singh during his six-day visit.
The updated treaty provides for stepped up cooperation in economic and commercial fields to exploit the existing but untapped potential for mutual benefit.
The new treaty removes some "outdated elements" and corrects the "colonial language" in the earlier agreement, officials said.
It does not envisage a change in the treatment of nationals of both countries or in the free trade regime that they have.
Khesar had said the new treaty symbolises India's commitment to "liberty, global equality and justice and confirms her rightful role as a leader in international affairs".