Double Taxation Avoidance Agreements (DTAA)

Double taxation occurs when a tax is imposed more than once on the same asset, income stream, or transaction i.e., levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes)

The Double Tax Avoidance Agreements (DTAA) is essentially bilateral agreements entered into between two countries, in our case, between India and another foreign state. The basic objective is to avoid, taxation of income in both the countries and to promote and encourage economic trade and investment between the two countries.

Under the Income Tax Act 1961 of India, there are two provisions, Section 90 and Section 91,which provide specific relief to taxpayers to save them from double taxation.

Section 90 is for taxpayers who have paid the tax to a country with which India has signed DTAA.
Section 91 provides relief to tax payers who have paid tax to a country with which India has not signed a DTAA.

Thus, India gives relief to both kind of taxpayer.The Non Resident can certainly take the benefit of the provisions of DTAA entered into between India and the country, in which he resides, more particularly in respect of Interest Income from NRO account, Government securities, Loans, Fixed Deposits with Companies and dividends etc. This is explained below: -


For the Assessment Year 2013-14,
Tax Deducted at Source(TDS) under the Indian Income Tax for Interest Income - 33.99% whereas,
Rate of Tax prescribed in the DTAA with the country where Non Resident resides e.g. Singapore - 15%
Therefore, chargeable rate will be 15 % (Lower of the Two)

Every Non Resident should choose lower of the tax rate prescribed in DTAA with the country where he resides and the tax rate prescribed under the Indian tax laws.

India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 88(signed 88 DTAAs out of which 85 have entered into force) countries. This means that there are agreed rates of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country.

Following are the countries with which India have entered into DTAA:

Armenia	China	Japan	Netherlands	Syrian Arab Republic
Australia	Cyprus	Kazakstan	New Zealand	Tajikistan
Austria	Czech Republic	Kenya	Norway	Tanzania
Bangladesh	Denmark	Korea	Oman	Thailand
Belarus	Egypt	Kuwait	Philippines	Trinidad and Tobago
Belgium	Estonia	Kyrgyz Republic	Poland	Turkey
Botswana	Ethiopia	Latvia	Portuguese Republic	Turkmenistan
Brazil	Fiji	Libya	Qatar	UAE
Bulgaria	Finland	Lithuania	Romania	UAR (Egypt)
Canada	France	Luxembourg	Russia	UGANDA
Armenia	Georgia	Malaysia	Saudi Arabia	UK
Australia	Germany	Malta	Serbia	Ukraine
Austria	Greece	Mauritius	Singapore	United Mexican States
Bangladesh	Hashemite Kingdom of Jordan	Mongolia	Slovenia	USA
Belarus	Hungary	Montenegro	South Africa	Uzbekistan
Belgium	Iceland	Morocco	Spain	Vietnam
Botswana	Indonesia	Mozambique	Sri Lanka	Zambia
Brazil	Ireland	Myanmar	Sudan
Bulgaria	Israel	Namibia	Sweden
Canada	Italy	Nepal	Swiss Confederation