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  • Double Taxation Avoidance Agreement

    What is Double Taxation Avoidance Agreement (DTAA)?

    The DTAA, or Double Taxation Avoidance Agreement is a tax treaty signed between India and another country ( or any two/multiple countries) so that taxpayers can avoid paying double taxes on their income earned from the source country as well as the residence country. At present, India has double tax avoidance treaties with more than 80 countries around the world.

    The need for DTAA arises out of the imbalance in tax collection on global income of individuals. If a person aims to do business in a foreign country, he/she may end up paying income taxes in both cases, i.e. the country where the income is earned and the country where the individual holds his/her citizenship or residence. For instance, if you are moving to a different country from India while leaving income sources such as interest from deposits in here, you will be charged interest by both India and the country of your current residence as per your consolidated global earnings. Such a scenario can have you pay twice the tax over the same income. This is where the DTAA becomes useful for taxpayers.

    Benefits of DTAA:

    There are lots of benefits associated with DTAA for taxpayers. The basic benefit includes not having to pay double taxes on the same income. Apart from this,

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

    The primary idea behind DTAA agreements with various countries is to minimize the opportunity for tax evasion for tax payers in either or both of the countries between which the bilateral/multilateral DTAA agreement have been signed.

    Lower withholding tax is a plus for taxpayers as they can pay lower TDS on their interest, royalty or dividend incomes in India, while some agreements provide for tax credits in the source or country of operations so that taxpayers don’t pay the same tax twice. In some cases, such as agreements with Mauritius, Cyprus, Singapore, Egypt etc. capital gains tax is exempted which can be a boon to taxpayers as they can use the DTAA agreement to minimize taxes.

    DTAA Rates:

    The rates and rules of DTAA vary from country to country depending on the particular signed between both parties. TDS rates on interests earned for most countries is either 10% or 15%, though rates range from 7.50% to 15%. List of DTAA rates for particular countries is given in the next section.

    Double Taxation Avoidance Agreement (DTAA) Country List:

    A total of 85 countries currently have DTAA agreements with India. The following countries having Double Taxation Avoidance Agreement with India. TDS rates on interests are listed below. (Listed alphabetically)

    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%

    DTAA is an effective financial agreement that is beneficial to both the taxpayer as well as the respective tax collection authorities in various countries.

    News about Double Taxation Avoidance Agreement

    • FPIs want India-Singapore DTAA to be Like France

      Foreign portfolio investors (FPIs) and private equity associations have made some suggestions towards the new Double Taxation Avoidance Agreement (DTAA) that will be signed between India and Singapore later this year.

      The industry is concerned that the tax treaty may be similar to the one forged with Mauritius, and wants it to be more like the treaties with France and the Netherlands.

      Among the suggestions is that capital gains tax should not be payable under different circumstances, including if the Singaporean investor holds less than 10 percent in the Indian company and if if shares are sold to a non-Indian buyer. Imposing capital gains tax – whether short-term or long-term – would make investment in India expensive for FPIs.

      8th August 2016

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