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Double Taxation Avoidance Agreement (DTAA)

What is Double Taxation Avoidance Agreement?

The Double Tax Avoidance Agreement (DTAA) is a tax treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income. A DTAA becomes applicable in cases where an individual is a resident of one nation, but earns income in another.

DTAAs can be either be comprehensive, encapsulating all income sources, or limited to certain areas, which means taxing of income from shipping, inheritance, air transport, etc. India presently has DTAA with 80+ countries, with plans to sign such treaties with more countries in the years to come. Some of the countries with which it has comprehensive agreements include Australia, Canada, the United Arab Emirates, Germany, Mauritius, Singapore, the United Kingdom and the United States of America.

Advantages of Double Taxation Avoidance Agreement

The intent behind a Double Tax Avoidance Agreement is to make a country appear as an attractive investment destination by providing relief on dual taxation. This form of relief is provided by exempting income earned in a foreign country from tax in the resident nation or offering credit to the extent taxes have been paid abroad.

Say, for instance, if an individual is asked to go abroad on deputation and receives payments during the period away from home, the income earned may be subject to tax in both the countries. The individual can claim relief at the time of filing tax return for that financial year, provided there is an applicable DTAA. If the person is an NRI with investments in India, there may be DTAA provisions that apply to income from such investments. In some cases, DTAAs also allow for concessional rates of tax. For instance, interest earned on NRI bank deposits attract TDS of 30%. However, under the DTAAs that India has signed with other countries, tax is deducted at 10-15%.

Double Taxation Avoidance Agreement Country List:

Below is a list of countries with which India has signed a Double Tax Avoidance Agreement:

  • Mauritius: Comprehensive Agreements
  • South Africa: Comprehensive Agreements
  • ADEN Rules, 1953: Other Agreements
  • Afghanistan: Limited Agreements
  • African Congress Mission: Other Agreements
  • USA: Intergovernmental agreement to Improve International Tax Compliance and to Implement FATCA
  • Albania: Comprehensive Agreements
  • Argentine: Tax Information Exchange Agreement (TIEA)
  • Armenia: Comprehensive Agreements
  • Australia: Comprehensive Agreements
  • Austria: Comprehensive Agreements
  • Bahamas: Tax Information Exchange Agreement (TIEA)
  • Bahrain: Tax Information Exchange Agreement (TIEA)
  • Bangladesh: Comprehensive Agreements
  • Bangladesh: Limited Multilateral Agreement
  • Belarus: Comprehensive Agreements
  • Belgium: Comprehensive Agreements
  • Belize: Tax Information Exchange Agreement (TIEA)
  • Bermuda: Tax Information Exchange Agreement (TIEA)
  • Bhutan: Comprehensive Agreements
  • Bhutan: Limited Multilateral Agreement
  • Botswana: Comprehensive Agreements
  • Brazil: Comprehensive Agreements
  • British Virgin Islands: Tax Information Exchange Agreement (TIEA)
  • Bulgaria: Comprehensive Agreements
  • Canada: Comprehensive Agreements
  • Cayman Islands: Tax Information Exchange Agreement (TIEA)
  • China: Comprehensive Agreements
  • Colombia: Comprehensive Agreements
  • Croatia: Comprehensive Agreements
  • Cyprus: Comprehensive Agreements
  • Czech Republic: Comprehensive Agreements
  • Denmark: Comprehensive Agreements
  • Dominions Rules, 1956: Other Agreements
  • Estonia: Comprehensive Agreements
  • Ethiopia: Comprehensive Agreements
  • Ethiopia: Limited Agreements
  • Fiji: Comprehensive Agreements
  • Finland: Comprehensive Agreements
  • France: Comprehensive Agreements
  • Georgia: Comprehensive Agreements
  • Germany: Comprehensive Agreements
  • Greece: Comprehensive Agreements
  • Guernsey: Tax Information Exchange Agreement (TIEA)
  • Hashemite Kingdom of Jordan: Comprehensive Agreements
  • Hungary: Comprehensive Agreements
  • San Marino: Tax Information Exchange Agreement (TIEA)
  • Iceland: Comprehensive Agreements
  • Iran: Limited Agreements
  • Ireland: Comprehensive Agreements
  • Isle of Man: Tax Information Exchange Agreement (TIEA)
  • Israel: Comprehensive Agreements
  • Italy: Comprehensive Agreements
  • Japan: Comprehensive Agreements
  • Jersey: Tax Information Exchange Agreement (TIEA)
  • Kazakhstan: Comprehensive Agreements
  • Kenya: Comprehensive Agreements
  • Korea: Comprehensive Agreements
  • Kuwait: Comprehensive Agreements
  • Kyrgyz Republic: Comprehensive Agreements
  • Latvia: Comprehensive Agreements
  • Lebanon: Limited Agreements
  • Liberia: Tax Information Exchange Agreement (TIEA)
  • Libya: Comprehensive Agreements
  • Lithuania: Comprehensive Agreements
  • Luxembourg: Comprehensive Agreements
  • MACAO SAR: Tax Information Exchange Agreement (TIEA)
  • Malaysia: Comprehensive Agreements
  • Maldives: Limited Agreements
  • Maldives: Limited Multilateral Agreement
  • Maldives: Tax Information Exchange Agreement (TIEA)
  • Malta: Comprehensive Agreements
  • Mongolia: Comprehensive Agreements
  • Montenegro: Comprehensive Agreements
  • Morocco: Comprehensive Agreements
  • Mozambique: Comprehensive Agreements
  • Myanmar (Union of Myanmar): Comprehensive Agreements
  • Malta: Comprehensive Agreements
  • Namibia: Comprehensive Agreements
  • Nepal: Comprehensive Agreements
  • Nepal: Limited Multilateral Agreement
  • Netherlands: Comprehensive Agreements
  • New Zealand: Comprehensive Agreements
  • Norway: Comprehensive Agreements
  • OECD Member Countries: Comprehensive Agreements
  • Oman: Comprehensive Agreements
  • Oriental Republic of Uruguay: Comprehensive Agreements
  • Poland: Comprehensive Agreements
  • Pakistan: Limited Agreements
  • Pakistan: Limited Multilateral Agreement
  • People Democratic Republic of Yemen: Limited Agreements
  • Philippines: Comprehensive Agreements
  • Portuguese Republic: Comprehensive Agreements
  • Principality of Liechtenstein: Tax Information Exchange Agreement (TIEA)
  • Principality of Monaco: Tax Information Exchange Agreement (TIEA)
  • Qatar: Comprehensive Agreements
  • Romania: Comprehensive Agreements
  • Russia: Comprehensive Agreements
  • Indonesia: Comprehensive Agreements
  • Macedonia: Comprehensive Agreements
  • Saint Kitts and Nevis: Tax Information Exchange Agreement (TIEA)
  • Saudi Arabia: Comprehensive Agreements
  • Serbia: Comprehensive Agreements
  • Seychelles: Tax Information Exchange Agreement (TIEA)
  • Singapore: Comprehensive Agreements
  • Slovak Republic: Comprehensive Agreements
  • Slovenia: Comprehensive Agreements
  • Spain: Comprehensive Agreements
  • Sri Lanka: Comprehensive Agreements
  • Sri Lanka: Limited Multilateral Agreement
  • Sudan: Comprehensive Agreements
  • Sweden: Comprehensive Agreements
  • Swiss Confederation: Comprehensive Agreements
  • Syrian Arab Republic: Comprehensive Agreements
  • Taipei: Specified Associations Agreement
  • Tajikistan: Comprehensive Agreements
  • Tanzania: Comprehensive Agreements
  • Thailand: Comprehensive Agreements
  • Trinidad and Tobago: Comprehensive Agreements
  • Turkey: Comprehensive Agreements
  • Turkmenistan: Comprehensive Agreements
  • UAE: Comprehensive Agreements
  • UAR (Egypt): Comprehensive Agreements
  • UK: Comprehensive Agreements
  • USA: Comprehensive Agreements
  • Uganda: Comprehensive Agreements
  • Ukraine: Comprehensive Agreements
  • United Mexican States: Comprehensive Agreements
  • Uzbekistan: Comprehensive Agreements
  • Vietnam: Comprehensive Agreements
  • Yemen Arab Republic: Limited Agreements
  • Zambia: Comprehensive Agreements

Source: Income Tax Department

Documents required to avail the benefits under DTAA

To benefits from the provisions laid under DTAA, an NRI individual will have to provide the following documents in a timely fashion to the concerned deductor.

  • Self-declaration cum indemnity format
  • Self-attested PAN card copy
  • Self-attested visa and passport copy
  • PIO proof copy (if applicable)
  • Tax Residency Certificate (TRC)

According to the Finance Act 2013, an individual will not be entitled to claim any benefit of relief under Double Taxation Avoidance Agreement unless he or she provides a Tax Residency Certificate to the deductor. To receive a Tax Residency Certificate, an application has to be made in Form 10FA (Application for Certificate of residence for the purposes of an agreement under section 90 and 90A of the Income-tax Act, 1961) to the income tax authorities. Once the application is successfully processed, the certificate will be issued in Form 10FB.

Frequently Asked Questions

How can the benefit of DTAA be used?

There are two modes by which DTAA can be used:

Tax credit - Under this method, tax relief can be claimed in the country of residence. Exemption - Under this method, tax relief can be claimed in any one of the two nations.

What are the various income types that fall under DTAA?

Under DTAA, NRIs do not have to pay tax twice on the income earned from:

  • Services that are provided in India
  • Salary that is received in India
  • Fixed deposits held in India
  • House property situated in India
  • Capital gains following transfer of assets in India
  • Savings bank account held in India

What are the details found in a Tax Residency Certificate?

A Tax Residency Certificate shall contain the following information:

  • Assessee’s name
  • Assessee’s status (Individual, Company, Firm, etc.)
  • Nationality
  • Country
  • Assessee Tax Identification or Unique ID number of the relevant country
  • Residential status for the purpose of tax
  • Validity Period of the certificate
  • Address of the applicant

Does one have to submit documents every year to avail benefits under the DTAA?

The benefit of DTAA is extended on an annual basis. This means that NRIs will have to provide all the necessary documents at the start of every financial year to continue availing the benefit that comes under DTAA.

What kinds of taxes are covered under DTAA?

The following types of taxes are covered under DTAA:

  • Income tax is generally covered under DTAA
  • Under certain treaties, wealth tax is also covered
  • Taxes that are substantially similar are covered (e.g. surcharge and education cess)
  • Taxes that are levied in substitution of existing taxes are covered

What sections under the Income Tax Act provide relief from paying double tax?

Section 90 and Section 91 of the Income Tax Act, 1961, provides taxpayers relief from paying double tax. Section 90 applies to cases where India has a bilateral agreement with another nation. It reads "Agreement with foreign countries or specified territories", while Section 90A covers "Adoption by Central Government of agreement between specified associations for double taxation relief". Section 91 applies to cases where India does not have any bilateral agreement, rather it has unilateral agreement. It states how tax relief can be availed in case of "Countries with which no agreement exists."

What are the TDS rates applicable under DTAA between India and countries like United States of America, Australia, the United Kingdom, Malaysia and New Zealand?

The TDS rates applicable are as follows: the United States of America - 15%, Australia - 15%, the United Kingdom - 15%, Malaysia - 10% and New Zealand - 10%.

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