What Is DTAA? Double Taxation Explained: Everything You Need To Know

Double taxation is when the same income or subject matter is taxed more than once for the same reason, during the same time period, and within the same tax jurisdiction. When this happens in two different countries, it can significantly impact an individual's overall income.

Paying taxes in both your home country and the country where you work can be challenging. To solve this issue, India, along with 85 other nations, including the USA, has signed the Double Taxation Avoidance Agreement (DTAA). 

This agreement is designed to help individuals, especially non-resident Indians (NRIs) working abroad, avoid being taxed twice on their income, both in their home country and their country of employment.

So taking you to explore the double taxation avoidance agreement, this article will also explain the benefits to individuals facing the issue of double taxation. Read on…

What is DTAA (Double Taxation Avoidance Agreement)?

The Double Taxation Avoidance Agreement (DTAA) is a treaty between India and other countries. It prevents individuals from being taxed twice on the same income, once in the country where they earn it and again in their home country. 

India has signed DTAA with over 80 countries to ensure a fair and balanced tax system, especially for those who work abroad.

A double taxation avoidance agreement is a signed pact or agreement between two or more countries. The DTAA promotes the trade in goods and services, economic activities, and capital investment between two countries. 

What Are The Advantages of The Double Taxation Avoidance Agreement (DTAA)?

The Double Taxation Avoidance Agreement is like a welcome mat for investors. It's all about making a country an attractive place to invest by preventing the headache of double taxation. 

This means you won't be taxed twice on the same income – once in the foreign country where you earned it and again in your home country. 

Instead, you get either exempted from tax on that foreign-earned income or receive a credit for taxes already paid abroad.

For example, if you work in another country and you earn money there, both countries might want a piece of your income. But thanks to DTAA, you can claim relief when you file your taxes for that year, provided the agreement applies. 

If you are a non-resident Indian (NRI) with investments in India, there are often DTAA rules that affect the income from those investments. 

Sometimes, these agreements also allow for lower tax rates. For instance, interest earned on NRI bank deposits usually has a 30% tax deduction. But, under DTAA, you might only have to pay 10-15% in tax.

Required Documents To Get DTAA Benefits

If you are an NRI looking to enjoy the perks of DTAA, you will need to provide the following documents to the right authorities on time:

1. A self-declaration cum indemnity format.

2. A copy of your PAN card, which you've self-attested.

3. Self-attested copies of your visa and passport.

4. If you're a Person of Indian Origin (PIO), a copy of your PIO proof (if it applies to you).

5. The all-important Tax Residency Certificate (TRC).

Keep in mind that, as per the Finance Act of 2013, you won't be able to claim any benefits under the Double Taxation Avoidance Agreement without that Tax Residency Certificate. 

To get one, you need to apply by filling out Form 10FA (that's the Application for Certificate of Residence for the purposes of an agreement under sections 90 and 90A to the income tax authorities. After successfully processing your application, you will get your certificate in the form of 10FB.

DTAA Rates

The rates and rules of DTAA can be different for each country, and they depend on the specific agreement signed between the two countries. 

For most countries, the TDS (Tax Deducted at Source) rate on earned interest is either 10% or 15%, but it can sometimes be as low as 7.50% or as high as 15%. You can find the list of DTAA rates for specific countries in the next section.

List of Countries With DTAA (Double Taxation Avoidance Agreements )

India has inked Double Taxation Avoidance Agreements (DTAA) with a grand total of 85 countries. The following nations have joined hands with India in this agreement:

Sl No.	Country	TDS Rate
1	Armenia	10%
2	Australia	15%
3	Austria	10%
4	Bangladesh	10%
5	Belarus	10%
6	Belgium	15%
7	Botswana	10%
8	Brazil	15%
9	Bulgaria	15%
10	Canada	15%
11	China	15%
12	Cyprus	10%
13	Czech Republic	10%
14	Denmark	15%
15	Egypt	10%
16	Estonia	10%
17	Ethiopia	10%
18	Finland	10%
19	France	10%
20	Georgia	10%
21	Germany	10%
22	Greece	As per agreement
23	Hashemite kingdom of Jordan	10%
24	Hungary	10%
25	Iceland	10%
26	Indonesia	10%
27	Ireland	10%
28	Israel	10%
29	Italy	15%
30	Japan	10%
31	Kazakhstan	10%
32	Kenya	15%
33	South Korea	15%
34	Kuwait	10%
35	Kyrgyz Republic	10%
36	Libya	As per agreement
37	Lithuania	10%
38	Luxembourg	10%
39	Malaysia	10%
40	Malta	10%
41	Mauritius	7.50-10%
42	Mongolia	15%
43	Montenegro	10%
44	Morocco	10%
45	Mozambique	10%
46	Myanmar	10%
47	Namibia	10%
48	Nepal	15%
49	Netherlands	10%
50	New Zealand	10%
51	Norway	15%
52	Oman	10%
53	Philippines	15%
54	Poland	15%
55	Portuguese Republic	10%
56	Qatar	10%
57	Romania	15%
58	Russia	10%
59	Saudi Arabia	10%
60	Serbia	10%
61	Singapore	15%
62	Slovenia	10%
63	South Africa	10%
64	Spain	15%
65	Sri Lanka	10%
66	Sudan	10%
67	Sweden	10%
68	Swiss Confederation	10%
69	Syrian Arab Republic	7.50%
70	Tajikistan	10%
71	Tanzania	12.50%
72	Thailand	25%
73	Trinidad and Tobago	10%
74	Turkey	15%
75	Turkmenistan	10%
76	UAE	12.50%
77	UAR (Egypt)	10%
78	Uganda	10%
79	UK	15%
80	Ukraine	10%
81	United Mexican States	10%
82	USA	15%
83	Uzbekistan	15%
84	Vietnam	10%
85	Zambia	10%

Conclusion

The Double Taxation Avoidance Agreement (DTAA) helps you avoid paying taxes in two places. Keep in mind, though, that a country may hold back some tax at the source and ask you to show proof of taxes paid with a foreign tax credit document.

The rules for dodging double taxation can be different in each country. So, it's vital to know what DTAA means and read up on the terms agreed upon by the countries involved. Our aim is that this blog has made the concept of the Double Taxation Avoidance Agreement clearer for you.

 

Also Read: ITR-U – What is ITR-U & How To File An Updated Return under Section 139(8A)

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