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DTAA

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    • Overview of DTAA
    • Benefits
    • Checklist/Requirements
    • Filing Process
    • Key Deliverables

    DTAA stands for Double Taxation Avoidance Agreement, it is a tax treaty signed between two or more countries to help the tax payers to avoid double taxation on the same income. A DTAA is applicable in those cases where a person is a resident of one nation but earns income in another.

    DTAA is useful for Non-Resident Indians. Usually, NRI live in other countries than India but earns income in India through business or property rents etc. In those cases, it is most likely that income earned in India would attract taxes in India as well as in the country of the NRI resident. when the income earned in India is transferred to the resident country. This means that they will have to pay taxes twice on the same income. As a measure to avoid this, double taxation DTAA (Double Taxation Avoidance Agreement) was amended.

    Having DTAA does not mean that the Non-Residents can completely avoid taxes, but it means that non residents can avoid paying higher taxes in both countries. India has DTAA agreement signed with many counties and Income earned by NRI would be taxable according to the tax rates set in the Double Tax Avoidance Agreement with that country.

    List of countries that India has Signed DTAA which are listed below:

    SI No. Country TDS Rate SI No. Country TDS Rate SI 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%

    Benefits of Double Tax Avoidance Agreements (DTAA):

    1. Avoidance of Double Taxation: The primary benefit of DTAA is to prevent individuals and businesses from being taxed twice on the same income in different countries. This helps in eliminating or reducing the tax burden and avoiding double taxation.
    2. Promotes Cross-Border Trade and Investment: DTAA promotes international trade and investment by providing certainty and clarity regarding taxation. It eliminates tax obstacles and uncertainties, making it more attractive for businesses and individuals to engage in cross-border transactions and investments.
    3. Tax Exemptions and Credits: DTAA often provides for exemptions or lower tax rates on certain types of income. It allows taxpayers to claim tax credits for taxes paid in the foreign country, thereby reducing the overall tax liability.
    4. Prevention of Tax Evasion and Fiscal Evasion: DTAA includes provisions for the exchange of information between countries to prevent tax evasion and fiscal evasion. This helps in ensuring that taxpayers comply with their tax obligations and discourages the misuse of tax havens for illegal activities.
    5. Promotes Economic Cooperation and Bilateral Relations: DTAA fosters economic cooperation and strengthens bilateral relations between countries. It encourages the flow of investment, technology, and expertise across borders, leading to economic growth and development.
    6. Reduction of Withholding Taxes: DTAA often reduces or eliminates withholding taxes on certain types of income such as dividends, interest, royalties, and capital gains. This facilitates cross-border transactions and encourages international business activities.

    Overall, DTAA provides certainty, fairness, and transparency in the taxation of cross-border income, promoting international trade, investment, and economic cooperation between countries.

    Checklist of common requirements for filing Income Tax Form 15CB:

    1. Basic Information:
      • Name, address, and PAN of the remitter.
      • Name, address, and PAN of the remittee.
      • Country to which the remittance is made.
      • Amount of remittance in Indian currency.
      • Currency in which the remittance is made.
      • Nature of the remittance as per the agreement.
    2. Remitter’s Bank Details:
      • Name of the bank.
      • Name of the branch.
      • BSR Code of the bank.
    3. Remittee’s Documents:
      • Duly filled Income Tax Form 10F by the authorized individual of the remittee.
      • Tax residency certificate or tax registration certificate of the remittee’s country.
      • Certificate proving the remittee does not have a permanent establishment within India.
    4. Certification:
      • The Form 15CB should be filled and certified by a Chartered Accountant.
    5. Digital Signature Certificate (DSC):
      • A valid and non-expired DSC of the Chartered Accountant is required for e-filing.
    6. Pre-filling Part C of Form 15CA:
      • The acknowledgement number of the e-Filed Income Tax Form 15CB is needed to prefill the details in Part C of Form 15CA.

    It’s important to note that the specific requirements may vary depending on the nature of the remittance and any applicable Double Taxation Avoidance Agreements (DTAA). It’s advisable to consult with a tax professional or refer to the official guidelines provided by the Income Tax Department for the most accurate and up-to-date checklist of requirements.

    The process of DTAA (Double Taxation Avoidance Agreement) typically involves the following steps:

    1. Documentation: Gather all the necessary documents and information required to claim benefits under the DTAA. This may include tax residency certificates, proof of income, and other supporting documents.
    2. Filing the Form: Complete the relevant forms or declarations as required by the tax authorities to claim the benefits under the DTAA. These forms may vary depending on the specific provisions of the agreement and the nature of the income.
    3. Submitting Documents: Submit the completed forms and supporting documents to the tax department or relevant authority. This may involve physically submitting the documents or using online platforms for electronic submission.
    4. Verification and Processing: The tax department verifies the submitted documents and processes the application for DTAA benefits. They may cross-check the information provided and may request additional documents or clarification if needed.
    5. Assessment and Determination: The tax department assesses the application based on the provisions of the DTAA and determines the tax liability or benefits applicable to the taxpayer. This may involve calculations, applying tax rates, and considering any exemptions or deductions allowed under the agreement.
    6. Communication of Decision: The tax department communicates the decision regarding the application for DTAA benefits to the taxpayer. This may include details of the tax liability, any adjustments made, or the benefits granted under the agreement.
    7. Compliance and Payment: If any tax liability is determined, the taxpayer needs to comply with the payment requirements and fulfill any other obligations as per the decision communicated by the tax department.

    It’s important to note that the specific process and requirements may vary depending on the countries involved, the provisions of the DTAA agreement, and the local tax laws. It is advisable to consult with tax professionals or refer to the official guidelines and procedures provided by the relevant tax authorities for accurate and up-to-date information on the process of DTAA.

    Key Deliverables

    • Copy of filed form 10
    • Acknowledgement copy

    What do you want to know?

    The Non-residents don’t have to pay double tax on the income earned from the following sources:

    1. Services provided in India
    2. Salary received in India
    3. House property located in India
    4. Capital gains on transfer of assets in India
    5. Fixed deposits in India
    6. Savings bank accounts in India

    There are two ways to claim the benefits under DTAA

    1. Tax Credit Method: In this method an Individual has to take all his income into consideration including foreign and home country and file the taxes as per the home country and avail credit while paying taxes.
    2. Exemption Method: In this method an Individual does not have to consider the home country income. He/she have to pay taxes just on the income they have earned in the foreign country. In this method he/she can choose to pay taxes in any one of the countries.

    Yes, the DTAA tax rates are updated every year, so an NRI must submit all the documents at the start of every Financial year.

    The following type of taxes are covered under DTAA

    1. Income tax
    2. Wealth tax is also covered Under certain treaties
    3. Taxes that are substantially similar are covered (e.g., surcharge and education cess)
    4. Taxes that are levied in substitution of existing taxes are covered

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