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Every individual needs to work and earn a living. However, paying taxes in both the residence country and the country where one works can be pretty challenging.
To remove such issues, the Double Taxation Avoidance Agreement was signed between India and 85 countries.
It allows NRIs with jobs in other countries to avoid double taxation on the income earned in India and resident countries. Keep scrolling to learn more about this agreement.
DTAA or Double Taxation Avoidance Agreement is an agreement that India signed with 85 other countries to avoid levying taxes twice on the same income.
This provision helps taxpayers accumulate income savings by paying the tax in only one country. DTAAs can be comprehensive in many countries.
The tax structure usually depends on the type of employment or business of a citizen in a specific country. The common categories include salary, services, capital gains, fixed deposit earnings, property, investment, etc.
This DTAA was formed due to the disparity in the collection of tax on a global scale. For instance, an individual who plans to run an enterprise in another country is forced to pay double taxes. He/she has to pay taxes in his home country as well as his country of income.
For a new entrepreneur, this can be straining in terms of funds and savings.
Even if an individual has shifted to another country and has deposits in India, they can incur interest in both countries as global income. Here, DTAA comes to the rescue.
Apart from learning DTAA meaning, individuals should check the benefits for a detailed understanding of the concept.
Individuals can avail multiple benefits against this agreement. Some of the common benefits of double taxation agreement, including non-payment of double taxes, are-
This agreement reduces the withholding tax or lowers DTAA TDS rates on dividend incomes in India.
For instance, capital gains tax is absolved in Cyprus, Egypt, Mauritius, Singapore, etc. This reduces the taxes in general.
Let’s check what are the documents required to gain DTAA benefits without hassle.
NRI’s are obligated to submit the mentioned documents to gain benefits and provisions laid under DTAA.
These papers are-
Apart from the mentioned documents, an individual is obligated to submit the Tax Residency Certificate to a deductor to be eligible to claim benefits under this DTAA agreement.
They have to submit Form 10FA to apply for a Tax Residency Certificate under sections 90A and 90 of the Income Tax Act. After successful verification and processing of the application, the certificate will be issued under Form 10FB.
The DTAA rate chart and its rules vary in different countries. This factor usually depends on the agreement signed between the countries.
Here, the TDS rates applicable on interests earnings can range between 10% to 15%. The levied rates can range up to 15%.
In this regard, individuals should check the rates specified against the listed countries under DTAA India.
There are nearly 85 countries signed under the DTAA agreements with India. These countries have removed the obligations of paying double taxes.
The countries who have signed Double Taxation Avoidance Agreement with India and their applicable rates are as follows-
[1]
|
Country |
DTAA Tax Rates |
|
Austria |
10% |
|
Australia |
10% |
|
Armenia |
15% |
|
Bangladesh |
10% |
|
Belarus |
10% |
|
Belgium |
15% |
|
Botswana |
10% |
|
Canada |
15% |
|
Cyprus |
10% |
|
Bulgaria |
15% |
|
Brazil |
15% |
|
China |
15% |
|
Denmark |
15% |
|
Czech Republic |
10% |
|
Hashemite Kingdom of Jordan |
10% |
|
South Korea |
15% |
|
Egypt |
10% |
|
Ethiopia |
10% |
|
Germany |
10% |
|
Estonia |
10% |
|
Italy |
15% |
|
Finland |
10% |
|
Georgia |
10% |
|
France |
10% |
|
Greece |
As per agreement |
|
Israel |
10% |
|
Hungary |
10% |
|
Indonesia |
10% |
|
Iceland |
10% |
|
Ireland |
10% |
|
Kyrgyz Republic |
10% |
|
Japan |
10% |
|
Kazakhstan |
10% |
|
Kenya |
10% |
|
Kuwait |
10% |
|
Libya |
As per agreement |
|
Mauritius |
7.50-10% |
|
Lithuania |
10% |
|
Namibia |
10% |
|
Morocco |
10% |
|
Montenegro |
10% |
|
Myanmar |
10% |
|
Mozambique |
10% |
|
Netherlands |
10% |
|
New Zealand |
10% |
|
Oman |
10% |
|
Malta |
10% |
|
Malaysia |
10% |
|
Luxembourg |
10% |
|
Mongolia |
15% |
|
Norway |
15% |
|
Nepal |
15% |
|
Uzbekistan |
15% |
|
Zambia |
10% |
|
Vietnam |
10% |
|
Trinidad and Tobago |
10% |
|
Tajikistan |
10% |
|
Turkmenistan |
10% |
|
UAR (Egypt) |
10% |
|
Uganda |
10% |
|
Ukraine |
10% |
|
United Mexican States |
10% |
|
UK |
15% |
|
USA |
15% |
|
Tanzania |
12.50% |
|
UAE |
12.50% |
|
Thailand |
25% |
|
Syrian Arab Republic |
7.50% |
|
Turkey |
15% |
|
Sweden |
10% |
|
Swiss Confederation |
10% |
|
Sudan |
10% |
|
South Africa |
10% |
|
Sri Lanka |
10% |
|
Slovenia |
10% |
|
Saudi Arabia |
10% |
|
Russia |
10% |
|
Qatar |
10% |
|
Portuguese Republic |
10% |
|
Serbia |
10% |
|
Philippines |
15% |
|
Singapore |
15% |
|
Poland |
15% |
|
Romania |
15% |
|
Spain |
15% |
This is some essential information on the Double Taxation Avoidance Agreement. An individual can avoid paying double taxes by applying for this benefit.
However, individuals should know that a country may deduct tax at source and show tax paid through the foreign tax credit document.
Thus, the double taxation avoidance rules vary from country to country. It is essential to understand what DTAA means and read the terms between the concerned countries to find the TDS rate.
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Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
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