A Brief About Double Tax Avoidance Agreement

Ritvik Srivastava, Amity University, Lucknow.

“DTAA” the full form of DTAA is Double Tax Avoidance Agreement.

DTAA is a tax treaty between two or more countries that prevent the taxpayer to pay tax in both countries twice. DTAA is applicable in cases where a person or a taxpayer is living in one country but earns in another country in those cases DTAA will be applicable.

To understand the concept of DTAA more clearly let’s go through an example.

Example: Arun is an Indian but residing in United Kingdom (UK). Mr. Arun has made an investment in India on which he earns returns now in normal case this income can be taxable in both the countries both in India and in UK. But because of DTAA. Mr. Arun will not be taxed in both the countries.

Another example: Mr. Y is a resident of India works in USA. And in return of his work, he gets remuneration in the USA. In this case if there is no agreement between India and USA then Mr. Y had to pay tax in both the countries but due to presence of DTAA the taxpayer will only pay in one country.

DTAA is a bilateral economic agreement between two countries. It is applicable in the situation where there is a clash of paying tax that where the taxpayer will pay the tax.

It is also very important to have knowledge that DTAA can only be claimed between the countries who are in to agreement of DTAA. If the countries have not signed the agreement with other country, then in that situation the tax payer has to pay the tax in both the countries.

India has signed the DTAA with over 80 countries. So, the relief of this agreement can only be claimed amongst there 80 countries only. If anybody or taxpayer is earning form the country where this agreement has not been done in this case the taxpayer has to pay the tax in both the countries.