What is Double Taxation Avoidance Agreement (DTAA)? Its Advantages and DTAA Rates

Double Taxation Avoidance Agreement (DTAA)

For NRIs who are working in different countries, the Double Taxation Avoidance Agreement assists with trying not to pay double taxes on income acquired in both their country of residence and India. There are 80 countries which India is having this agreement with.

What is Double Taxation Avoidance Agreement (DTAA)?

The Double Taxation Avoidance Agreement or DTAA is a tax treaty endorsed among India and another country (or any two/different countries) with the goal that taxpayers can try not to pay double taxes on their income acquired from the source country just as the residence country. As of now, India has double tax avoidance treaties with in excess of 80 countries around the globe.

The requirement for DTAA emerges out of the imbalance in tax collection on global income of individuals. In the event that an individual means to work together in a foreign country, he/she may wind up paying income taxes in the two cases, for example the country where the income is procured and the country where the individual holds his/her citizenship or residence.

For example, in the event that you are moving to an alternate country from India while leaving income sources, for example, interest from deposits in here, you will be charged interest by the two India and the country of your present residence according to your united global earnings. Such a situation can have you pay double the tax over a similar income. This is the place where the DTAA gets valuable for taxpayers.

Advantages of DTAA

There are loads of advantages related with DTAA for taxpayers. The fundamental advantage incorporates not paying double taxes on a similar income. Aside from this,

• Lower Withholding (Tax Deduction at Source or TDS)
• Tax credits
• Exemption from taxes

(Also Read: TDS provisions for NRIs)

The essential thought behind DTAA agreements with different countries is to minimize the open door for tax evasion for tax payers in either or both of the countries between which the reciprocal/multilateral DTAA agreement have been agreed upon.

Lower retaining tax is an or more for taxpayers as they can pay lower TDS on their interest, royalty or dividend incomes in India, while a few agreements accommodate tax credits in the source or country of activities so taxpayers don't pay a similar tax twice.

Now and again, for example, agreements with Mauritius, Cyprus, Singapore, Egypt and so on capital gains tax is excluded which can be a help to taxpayers as they can utilize the DTAA agreement to minimize taxes.

DTAA Rates

The rates and rules of DTAA shift from country to country contingent upon the specific endorsed between the two players. TDS rates on interests procured for most countries is either 10% or 15%, however rates range from 7.50% to 15%. Rundown of DTAA rates for specific countries is given in the following section.

Countries having a DTAA with India

An aggregate of 85 countries right now have DTAA agreements with India. The accompanying countries having Double Taxation Avoidance Agreement with India. TDS rates on interests are recorded beneath. (Recorded sequentially)

Country  -  TDS Rate

• Armenia - 10%
• Australia - 15%
• Austria - 10%
• Bangladesh - 10%
• Belarus - 10%
• Belgium - 15%
• Botswana - 10%
• Brazil - 15%
• Bulgaria - 15%
• Canada - 15%
• China - 15%
• Cyprus - 10%
• Czech Republic - 10%
• Denmark - 15%
• Egypt - 10%
• Estonia - 10%
• Ethiopia - 10%
• Finland - 10%
• France - 10%
• Georgia - 10%
• Germany - 10%
• Jordan - 10%
• Hungary - 10%
• Iceland - 10%
• Indonesia - 10%
• Ireland - 10%
• Israel - 10%
• Italy - 15%
• Japan - 10%
• Kazakhstan - 10%
• Kenya - 15%
• South Korea - 15%
• Kuwait - 10%
• Kyrgyz Republic - 10%
• Lithuania - 10%
• Luxembourg - 10%
• Malaysia - 10%
• Malta - 10%
• Mauritius - (7.50-10%)
• Mongolia - 15%
• Montenegro - 10%
• Morocco - 10%
• Mozambique - 10%
• Myanmar - 10%
• Namibia - 10%
• Nepal - 15%
• Netherlands - 10%
• New Zealand - 10%
• Norway - 15%
• Oman - 10%
• Philippines - 15%
• Poland - 15%
• Portuguese Republic - 10%
• Qatar - 10%
• Romania - 15%
• Russia - 10%
• Saudi Arabia - 10%
• Serbia - 10%
• Singapore - 15%
• Slovenia - 10%
• South Africa - 10%
• Spain - 15%
• Sri Lanka - 10%
• Sudan - 10%
• Sweden - 10%
• Swiss Confederation - 10%
• Syrian Arab Republic - 7.50%
• Tajikistan - 10%
• Tanzania - 12.50%
• Thailand - 25%
• Trinidad and Tobago - 10%
• Turkey - 15%
• Turkmenistan - 10%
• UAE - 12.50%
• UAR (Egypt) - 10%
• Uganda - 10%
• UK - 15%
• Ukraine - 10%
• United Mexican States - 10%
• USA - 15%
• Uzbekistan - 15%
• Vietnam - 10%
• Zambia - 10%

DTAA is a compelling financial agreement that is valuable to both the taxpayer just as the particular tax collection experts in different countries.

Income types under DTAA

Under the Double Tax Avoidance Agreement, NRIs don't need to pay tax twice on the accompanying income acquired from:

• Services gave in India.
• Salary got in India.
• House property situated in India.
• Capital gains on transfer of assets in India.
• Fixed deposits in India.
• Savings bank account in India.

On the off chance that income from these sources is taxable in the NRI's country of residence, they can try not to pay taxes on it in India by profiting the advantages of DTAA.

DTAA methods

The advantage of DTAA can be utilized by two methods:

• Tax credit: Tax relief under this strategy can be guaranteed in the country of residence.
• Exemption: Tax relief under this technique can be asserted in any of the two countries.