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Bytes - Your weekly dose of
investments, taxes, finance & more.
Divya Singhvi
For NRIs who are working in other countries, the DTAA (Double Taxation Avoidance Agreement) helps to avoid paying double taxes on income earned in both their country of residence and India. Its key objective is that tax-payers in these countries can avoid taxation for the same income twice. India has 85 active agreements. The basic objective of DTAA is to promote and foster economic trade and investment between two Countries by avoiding double taxation. You can check the DTAA entered into by India with other countries from the income tax department’s website through this link Notification of Government.
DTAA means a Tax Treaty between two or more countries to avoid taxing the same income twice. When a person is residing in one country and earning income in some other country they are covered under DTAA. This means that involved countries have agreed upon tax rates and jurisdictions for income arising from their country.
For example, Mr. Arjun is an Indian residing in the UK. He has made investments in India on which he earns returns. Now, this Income can be taxable in both India and the UK. But because of DTAA, Mr. Arjun will not be taxed in both countries for the same income.
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Relief from Double Taxation can be provided in two ways:
There are two ways of implementing DTAA:
Continuing the example, as Mr. Arjun is covered under DTAA. And the agreement states that the UK will exempt his entire income earned on investments made in India then he has to pay taxes only in India and not the UK. Only one particular country will charge his income.
Now, let’s say that the agreement states that India and the UK both will charge taxes on that income. In that case, Mr. Arjun will get a credit of the taxes paid by him in the UK which will be deducted while paying taxes in India. So he will end up paying taxes in both countries but at lowered rates.
The Governments of different countries enter into Double Taxation Avoidance Agreements to provide reliefs to the tax-payers and encourage more investments.
Non resident Indians residing in any of the DTAA countries can avail of tax benefits provided under DTAA by timely submission of the following documents every financial year within the due dates:
The process of application of DTAA involves a series of steps, involving the different types of provisions.
In case there is DTAA with the Country, then Tax Relief can be claimed u/s 90. Steps to compute Double Taxation relief:
The amount of relief shall be lower of (4) and (5).
In case there is No DTAA, then Tax Relief can be claimed u/s 91. Steps to compute relief:
Relief will be the amount as computed in Step 3.
India has signed a Double Tax Avoidance Agreement with most major nations where Indians reside. Following is the list of some of the major countries:
| Country | DTAA TDS rate |
| United States of America | 15% |
| United Kingdom | 15% |
| Canada | 15% |
| Australia | 15% |
| Germany | 10% |
| South Africa | 10% |
| New Zealand | 10% |
| Singapore | 15% |
| Mauritius | 7.5% to 10% |
| Malaysia | 10% |
| UAE | 12.5% |
| Qatar | 10% |
| Oman | 10% |
| Thailand | 25% |
| Sri Lanka | 10% |
| Russia | 10% |
| Kenya | 10% |
Individuals who are residing in one country and earning any income from another country are covered under the Double Taxation Avoidance Agreement (DTAA).
Individuals who are NRIs are covered under DTAA. They are required to submit their “Tax Residency Certificate (TRC)” to the deductor (Bank) along with Form-10F & PAN No.
India has Double Taxation Avoidance Agreements (DTAA) with a total of 88 countries out of which 86 are presently in force.
TRC should contain the following details:
– Name of the assessee.
– Status of the assessee (Individual, Firm, Company Etc.)
– Nationality
– Country
– Assessee Tax Identification or Unique Identification number of the relevant Country
– Residential status for the purpose of tax
– Validity Period of the certificate
– Address of the applicant
Hi @Dixita
In case there is No DTAA, then Tax Relief can be claimed u/s 91. You can follow the below-mentioned steps to compute relief:
Hope this help