Cross-border income often faces a common challenge: the same income being taxed twice, first in the country where it is earned and again in the country where the taxpayer resides. To prevent this burden, India has signed multiple Double Taxation Avoidance Agreements (DTAA) with partner nations. Understanding these treaties is vital for residents earning overseas income and for Non-Resident Indians (NRIs) with financial ties to India.
DTAA is a bilateral treaty that protects taxpayers from double taxation, enabling smoother global trade and investment.
Double taxation occurs when one source of income is taxed by two different countries.
Example: An Indian resident earns interest from the USA. The U.S. deducts tax at source, and India also seeks to tax that same interest as global income.
DTAA is a formal treaty between India and another nation, defining how specific income types are taxed and providing relief mechanisms.
The Indian Income Tax Act allows residents and NRIs to claim DTAA relief when income is taxed in both India and the treaty country.
Rates vary per treaty. Typical withholding tax rates: Interest 10-15%, Dividends 10-15%, Royalties 10%, Technical Fees 10-15%. Actual rates depend on treaty terms.
India has DTAA treaties with over 90 countries including USA, UK, UAE, Singapore, Australia, Canada, Germany, France, and Japan.
Indian resident earns ₹5 lakh dividend from a US company. Without DTAA, tax is deducted in both countries at full rates. With DTAA, US reduces tax to 15%, and India provides credit for the tax paid, avoiding double taxation.
DTAA prevents double taxation, encourages cross-border trade, and provides clarity for taxpayers with global income. Understanding DTAA benefits, processes, and documentation helps Indian residents and NRIs optimize tax liability and maintain compliance.
It’s a tax treaty between India and another country to prevent the same income from being taxed twice.
Check the Income Tax Department of India’s website for the latest country list and specific treaty rates.
Common income types include salary, interest, dividends, royalties, and capital gains.
DTAA is the treaty itself; a tax credit is the relief you claim under the treaty for taxes paid abroad.
By obtaining a Tax Residency Certificate, filing Form 10F, and claiming benefits under the relevant DTAA article when filing their Indian ITR.