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written by | April 22, 2022

Double Taxation Avoidance Agreement (DTAA): Benefits and Rates

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Tax is a legal aspect imposed on every individual who has a certain amount of income or a businessman who earns a certain amount of profit. The government imposes this taxation to contribute to the growth and development of the country. However, a certain condition occurs when an individual who belongs to one nation works in another government to earn his income. This condition requires you to sign legal documentation to prevent the individual from paying the taxes imposed on it from the residence country and the country that is his income source. This legal documentation is called the Double Taxation Avoidance Agreement. There are several benefits of this agreement.

Did you know?

India has Double Taxation Avoidance Agreement (DTAA) with 88 countries, but presently 85 are in force.

Also Read: Everything You Need to Understand About Filing Returns for Previous Years

Double Taxation Avoidance Agreement (DTAA)

The DTAA full form is the Double Taxation Avoidance Agreement. This agreement is a treaty signed between two or multiple countries to prevent an individual from paying double tax. Such a condition for the payment of double taxes occurs when an individual belongs to one nation and is earning his income from any other country. This makes it liable for that particular individual to pay the taxes as being the residence of one nation and earning in another nation. This agreement is signed by a businessman, an individual belonging to a shipping business, transportation business, inheritance, etc.

What Is a Double Taxation Avoidance Agreement?

The Double Taxation Avoidance Agreement is a legalised document signed between 2 countries or multiple countries to prevent an individual from being imposed by double taxation. The DTAA is liable over salary, property, fined deposit accounts, services, capital gains tax, savings, etc. Therefore, an individual earning revenue from transportation or business from any other nation can undertake or sign this agreement to prevent the implementation of double taxes over the revenue. There is a primary and essential role of DTAA in the income tax department. DTAA helps the businessman or an individual protect it from the liability of paying extra taxes and provides several legal benefits, which include the exemption of taxes on several grounds, which proves to be very beneficial in terms of business and trading.

Also Read: How Does a Resident Indian Collect Tax Credit on International Revenue?

Advantages of Double Taxation Avoidance Agreement

The Double Taxation Avoidance Agreement proves to be beneficial to several taxpayers. The basic principle of this agreement is to prevent and avoid the double taxation implementation over the same revenue. This is quite helpful for the businessman and the individual that is a resident of one country and has its setup, transportation business, shipping business or any other business established in any other nation. Apart from preventing double taxation, the DTAA also provides the exemption from tax. The Double Taxation Avoidance Agreement provides several conditions and situations wherein individuals can apply for the exemption over their taxes. This exemption is implemented over the capital gains taxes, which proves to be beneficial to the taxpayers and business people in terms of business and trading. It also provides the tax credit in the source country, i.e., the country where the revenue is generated, preventing the payment of the same tax twice. Based on these advantages and benefits, the Double Taxation Avoidance Agreement must be signed for the proper transaction of the revenue and the establishment of a business overseas, without the hassle of paying the taxes two times over the same profit.

Double Taxation Avoidance Agreement Country List

The DTAA rates are decided over the amount of the salary, i.e., it depends upon an individual's salary. However, the double taxation avoidance agreement has specific TDS rates fixed by the particular countries, ranging from 10 to 15 percent. However, several countries have TDS rates as low as 7.5 to 10 percent. The list of the countries and their respective TDS rates are in the given table,

S. No.

Country

TDS rates

1

Australia

15%. 

2

Austria

10%.

3

Bangladesh

10%.

4

Belgium

15%.

5

Brazil

15%.

6

Canada 

15%.

7

Denmark 

15%. 

8

Egypt

10%.

9

Finland

10%.

10

Georgia 

10%.

11

Germany

10%.

12

Hungry

10%.

13

Indonesia

10%.

14

Japan

10%.

15

South Korea 

15%. 

16

New Zealand

10%.

17

The USA

15%. 

18

Vietnam

10%.

19

Zambia

10%.

However, some countries have a meagre TDS rate, including the Syrian Arab Republic, with 7.50 percent. Similarly, Tanzania and UAE provide a 12.5% of TDS rate over the DTAA. There is a total of 85 countries that have legalised and have the provision of a double taxation avoidance agreement with India.

Documents Required to Avail of The Benefits Under DTAA

India is a developing country, and it is growing at the fastest pace on its own, which led to the development of several international investments in India. This had increased the number of immigrants. Therefore, India needed to attain the Double Taxation Avoidance Agreement law. Section 90 and 91 of the given taxation leisure have the provision of the Double Taxation Avoidance Agreement (DTAA). Several documents required for filing a DTAA are

  1. A self-declared security format, i.e., an indemnity format, is required. 
  2. A self-attested copy of PAN Card. 
  3. A self-fastest copy of a visa as well as the passport.
  4. If needed for the documentation, attached PIO proof copy. 
  5. The Tax Residency certificate.

An individual earning revenue from any other nation must have a tax residency certificate. This certificate is very much essential for signing the double taxation avoidance agreement. You can get your tax residency certificate by applying for Form 10FA under the authority of the income tax department. After verifying the provided information and overall application, the particular individual gets the tax residency certificate. Having the tax residency certificate makes it easy and an individual eligible for filing the Double Taxation Avoidance Agreement.

Conclusion

Several individuals have their businesses globally when it comes to business and trading. When a company is global, it generates its revenue from several other nations. However, the owner or the businessman is a resident of a particular country. In such a condition, the double taxation situation may occur, where an individual must pay taxes two times over the same revenue, income, salary, etc. To prevent such a situation, two or more countries sign the Double Taxation Avoidance Agreement (DTAA) over a certain TDS rate, which rages between 10% to 15%, to prevent the implementation of double taxes on an individual. Eighty-five countries have the provision of DTAA with India. The DTAA also provides the privilege of tax exemption over capital gains taxes.

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FAQs

Q: How many countries are associated with India in providing a Double Taxation Avoidance Agreement?

Ans:

A total of 85 countries have joined their hands with India in the provision of a Double Taxation Avoidance Agreement. Each of these countries has its specific TDS rate that ranges from 10 to 15 percent. However, several countries have a relatively low TDS rate, ranging from 7.5% to 10%. Syrian Arab Republic is one such country that provides a 7.5% of TDS rate in the signing of DTAA with India. Along with this, UAE and Tanzania are those countries that offer a minimum TDS rate of 12.5%.

Q: What are the advantages of DTAA?

Ans:

It is advantageous to the exemption of taxes over the capital gains tax, which is quite beneficial for business people and taxpayers.

Q: What is the documentation required for filing the DTAA?

Ans:

Documentation required for filing the Double Taxation Avoidance Agreements includes a security format, i.e., an indemnity format, a self-attested pan card copy, a self-attested passport copy, a self-attested Visa, and a PIO proof copy and the Tax Residency certificate. The Tax Residency Certificate is essential documentation for filing the DTAA.

Q: What is the need for tax?

Ans:

The taxes are the compulsory contribution that the government of a particular nation sets over a certain amount of salary, income, revenue, etc., that an individual earns to use that contribute towards the country's development, enhancement, and growth. Every earning individual in a country is liable to pay their taxes, and there's an important role of DTAA in income tax grounds.

Q: What is DTAA in income tax?

Ans:

The DTAA in income tax is the Double Taxation Avoidance Agreement, a legalised documentation signed between 2 or multiple countries to prevent the payment of double taxes over the same amount of salary, revenue, profit, income, etc. An individual who has their source of income established in any other nation signs it.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.