Double Taxation Avoidance Agreements (DTAA)

Описание: What is DTAA?
Double Taxation Avoidance Agreements is a treaty signed between two countries, which, through the elimination of international double taxation, promotes the exchange of goods, services, and investment of capital between the two countries.

This implies that there are consented tax rates and jurisdiction on specified kinds of incomes arising in one country to a tax resident of another nation. The taxpayers in these 88 countries can avoid being taxed twice for the same income.

Double taxation is an issue related to the taxation of income that crosses boundaries. DTAA can either cover all types of income or can target a specific type of income depending upon the types of businesses/holdings of citizens of one country in another.
The following categories are covered under the Double Taxation Avoidance Agreements (DTAA):
services
salary
property
capital gains
savings/fixed deposit accounts
Candidates should have a clear concept about the different agreements or treaties signed between India and any other country as they form an important part of the UPSC Syllabus. Candidates can also download the notes PDF at the end of this article.

Benefits of Double Taxation Avoidance Agreements

Sections 90 and 91 under the Income Tax Act 1961 offers specific relief to taxpayers to avoid double taxation. Section 90 deals with those provisions involving taxpayers who have paid tax to another country with which India has a DTAA. Section 91 is for those countries with which India does not have a DTAA. In effect, India provides relief to both types of taxpayers.

Some of the major benefits of Double Taxation Avoidance Agreements (DTAA) are mentioned below:

The countries under the DTAA are provided relief from double taxation. Relief on double taxation is provided by the exemption of incomes earned abroad from tax in the resident country or by providing credit to the extent taxes that have been already been paid abroad.
In some cases, the DTAA also provide concessional rates of tax.
DTAA can become an incentive for even legitimate investors to route investments through low-tax regimes to sidestep taxation. This leads to a loss of tax revenue for the country.
DTAA also provides tax certainty to the various investors and businesses of both the countries through the clear allocation of taxing rights between the contracting states by Agreement.

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