Double taxation is the levying of tax by two or more countries on the same income, assets or financial transactions. This dual responsibility is mitigated in many respects, including a tax treaty between the countries concerned. Let us try to answer some important questions about these agreements/treaties. Please note that the list of countries with which we have a DBAA is constantly evolving, depending on the government`s policy that changes from time to time. Therefore, you should check the new list each time to determine if any changes have been made or influenced. We advise you to check the list regularly. Indeed, India is currently reviewing its DBAA agreements with many countries, which could soon be amended. Keep in mind that the list of DBAA countries will continue to change on the basis of the often modified agreements. We advise you to explore your bank for more details. DBAAs are sometimes used by unscrupulous companies to pay very less or no taxes by being imitated as companies or entities in one of the countries parties to the agreement.
The result is an end in sales. To avoid this, countries generally include a “Limitation of Benefits” (LoB) clause in their DBAAs. DBAAs can be either complete, all sources of revenue are encapsulated or limited to certain areas, which means that revenues from shipping, inheritance, air transport, etc., are taxed. India currently has DTAA with more than 80 countries, with plans to sign such contracts with more countries in the coming years. Among the countries with which it has comprehensive agreements are Australia, Canada, the United Arab Emirates, Germany, Mauritius, Singapore, the United Kingdom and the United States of America. If an Indian resident deducts income and is taxed in the United States, India authorizes the amount of income tax paid in the United States in the form of a deduction. However, this deduction cannot exceed the Indian tax paid on foreign income collected. Under the agreement, the revenues are: Section 90 and Section 91 of the Income Tax Act, 1961, offer tax payers an exemption from double taxation. Section 90 applies to cases where India has a bilateral agreement with another nation.
These are “foreign agreements or certain areas,” while Section 90A includes “The adoption by the central government of agreements between certain associations to facilitate double taxation.” Section 91 applies to cases where India does not have a bilateral agreement, but a unilateral agreement. It outlines how to benefit from tax relief when “countries with which there is no agreement” can be used. The agreement on double tax evasion is a treaty signed by two countries. The agreement is signed to make a country an attractive tourist destination and allow NGOs to decide whether to pay several taxes. DTAA does not mean that NRA can totally avoid taxes, but it does mean that NRA can avoid paying higher taxes in both countries.