For NRIs who are working in other countries, the Double Taxation Avoidance Agreement helps to avoid paying double taxes on income earned in both their country of residence and India.
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.
How NRIs can Claim Benefits Under DTAA
NRIs can avoid paying double tax under the Double Tax Avoidance Agreement.
NRIs can avoid paying double tax as per the Double Tax Avoidance Agreement (DTAA). Usually, Non-Resident Indians (NRI) live abroad, but earn income in India. In such cases, it is possible that the income earned in India would attract tax in India as well as in the country of the NRI’s residence. This means that they would have to pay tax twice on the same income. As a measure to avoid this, the Double Tax Avoidance Agreement (DTAA) was amended.
Understanding DTAA
The Double Tax Avoidance Agreement is a treaty signed by two countries. The agreement is signed to make a country an attractive destination as well as to enable NRIs to get relief from having to pay taxes multiple times. DTAA does not mean that the NRI can completely avoid taxes, but it does mean that the NRI can avoid paying higher taxes in both countries. DTAA does allow an NRI to cut down on their tax implications on the income earned in India. DTAA also reduces the instances of tax evasion.
DTAA rates
DTAA, signed by India with different countries, fixes a specific rate at which tax has to be deducted on income paid to residents of that country. This means that when NRIs earn an income in India, the TDS applicable would be according to the rates set in the Double Tax Avoidance Agreement with that country.
Countries that India has a DTAA with
India has signed a Double Tax Avoidance Agreement with most major nations where Indians reside. Some of these countries are:
| Country | DTAA TDS rate |
| United States of America | 15% |
| United Kingdom | 15% |
| Canada | 15% |
| Australia | 15% |
| Germany | 10% |
| South Africa | 10% |
| New Zealand | 10% |
| Singapore | 15% |
| Mauritius | 7.5% to 10% |
| Malaysia | 10% |
| UAE | 12.5% |
| Qatar | 10% |
| Oman | 10% |
| Thailand | 25% |
| Sri Lanka | 10% |
| Russia | 10% |
| Kenya | 10% |
Income types under DTAA
Under the Double Tax Avoidance Agreement, NRIs don’t have to pay tax twice on the following income earned from:
- Services provided in India.
- Salary received in India.
- House property located in India.
- Capital gains on transfer of assets in India.
- Fixed deposits in India.
- Savings bank account in India.
If income from these sources is taxable in the NRI’s country of residence, they can avoid paying taxes on it in India by availing the benefits of DTAA.
DTAA methods
The benefit of DTAA can be used by two methods:
- Tax credit: Tax relief under this method can be claimed in the country of residence.
- Exemption: Tax relief under this method can be claimed in any one of the two countries.
Frequently Asked Questions
- What are the incomes on which an NRI can claim tax credit/tax exemption for income earned in India in the resident country?
The income on which a NRI can claim tax exemption/credit will be mentioned in the DTTA with the resident country. The provisions of DTAA are not the same for all countries.
