Meaning of DTAA

• DTAA stands for Double Taxation Avoidance Agreement, a treaty between two or more countries.
  
• Its purpose is to prevent the same income from being taxed twice in both countries.
  
• It applies to individuals and entities who earn income in a country other than their residence.
  
• The agreement outlines how tax will be shared between the two countries.
  
• India has signed DTAAs with more than 90 countries worldwide.
  

Purpose and Benefits of DTAA

• Avoids double burden of taxation on the same income in two jurisdictions.
  
• Promotes cross-border trade and investment by providing tax certainty.
  
• Helps taxpayers reduce overall tax liability legally.
  
• Prevents tax evasion and promotes exchange of information between countries.
  
• Encourages compliance and smooth dispute resolution.
  

Types of Relief Under DTAA

• Exemption Method: Income is taxed in only one of the countries.
  
• Tax Credit Method: Income is taxed in both countries, but credit is given in the resident country.
  
• Relief ensures that the effective tax rate does not exceed the higher rate of either country.
  
• The specific method depends on the treaty provisions.
  
• Taxpayers must choose the correct method while filing their return.
  

Who Can Avail DTAA Benefits

• Non-Resident Indians (NRIs) earning income from India.
  
• Foreign nationals or companies earning dividends, interest, royalties, or other income from India.
  
• Indian residents earning income from a foreign country with which India has a DTAA.
  
• The taxpayer must be a resident of one contracting country and earn income in the other.
  
• A valid Tax Residency Certificate (TRC) must be submitted to claim DTAA benefit.
  

Common Income Covered Under DTAA

• Salaries and wages earned abroad.
  
• Capital gains on sale of assets in foreign countries.
  
• Interest, dividends, and royalties received from overseas.
  
• Professional or technical services rendered across borders.
  
• Income from business operations in both treaty countries.