What Is Double Taxation Avoidance Agreement (Dtaa)

Sections 90 and 91 of the Income Tax Act 1961 exempt taxpayers from the payment of double taxation. Article 90 applies to cases where India has concluded a bilateral agreement with another country. It reads as follows: “agreements with foreign countries or certain territories”, while Article 90A covers “the adoption by the central government of an agreement between certain associations on the alleviation of double taxation”. Article 91 applies to cases where India does not have a bilateral agreement but a unilateral agreement. It indicates how tax relief can be requested for “countries with which there is no agreement”. There are two types of double taxation: judicial double taxation and economic double taxation. In the first case, if the source rule overlaps, the tax is levied by two or more countries in accordance with their national law in respect of the same transaction, the income arises or is considered to arise from their respective jurisdictions. In the latter case, when the same transaction, an object of income or capital is taxed in two or more States but in the hands of another person, double taxation occurs. [1] 3. Prevent international tax evasion; The term “double taxation” may also refer to the double taxation of income or activity.

For example, corporate profits can be taxed first if they are earned by the company (corporation tax) and again if the profits are distributed to shareholders in the form of a dividend or other distribution (dividend tax). Second, the United States authorizes a foreign tax credit that offsets income tax paid to foreign countries against U.S. income tax attributable to foreign income not covered by this exclusion. The foreign tax credit is not allowed for taxes paid on excluded business income under the rules described in the preceding paragraph (i.e., no double soaking). [17] NRI can avoid paying double taxation under the Double Tax Avoidance Agreement (DBAA). Usually, non-resident Indians (NRIs) live abroad but earn income in India. In such cases, it is possible that income earned in India will be taxed both in India and in the country of residence of the NRI. This means that they would have to pay taxes on the same income twice.

To avoid this, the Double Taxation Convention (DTA) has been amended. Take, for example, the DTAA between India and Singapore. .

Author: daniele130