Double Tax Avoidance Agreement : How NRI Can Get Tax Benefits Under DTAA

Are you NRI who has dual income and earning in a foreign country as well as India? this post may interest you as this tells about how you can get DTAA taxation benefits. DTAA is Double Tax Avoidance Agreement. DTAA is an agreement between two countries to avoid double taxation. It is globally known as a tax treaty.

What is Double Taxation

Many times it happens that one can have income earned in one country would attract tax in another country also. This is called double taxation. E.g If you are moving abroad by keeping your income source in India.  Such income would definitely attract taxes in India as well as the country of your residence. This is called double taxation. To avoid double taxation and to make the country attractive destination a concept of double tax avoidance agreement is developed.

How DTAA Helps You?

Don't expect from DTAA to eliminate the amount of tax payable as a whole buy It would definitely enable NRI to reduce the tax burden. 

• In simple terms whenever NRIs earn an income in India, instead of normal TDS, tax rate decided under tax treaty DTAA is applicable.

• It helps NRI to reduce the tax burden. The tax rate applicable to this type of income would be taxed at the prescribed rate under the act. 
• India has established DTTA with more than 80 foreign countries across the world. You can check the details of agreement on Income Tax website 
• Below are tax percent for each country for reference. DTAA tax rate are different for different countries. It is recommended to contact experts in this subject to claim benefits under double tax avoidance agreement.

Sl 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 DTAA

There are multiple benefits of DTAA. Below are some of the definite benefits

1. The lower Tax burden for NRI
2. Minimize the opportunity of tax evasion
3. Double taxes will be avoided on the same income
4. Tax exemption

Income Types under DTAA

The income types covered under double tax avoidance agreement are given below, and NRI can avoid paying double taxation on below income

1. Any income arising from capital gain on transfer of assets in India.
2. Income from House property located in India.
3. Salary Income received in India.
4. Interest income earned in India from saving the account, fixed deposit etc.
5. Royalty income earned in India.
6. Income from the service provider in India.

How NRI Can Get Benefits of DTAA Of Taxation?

In order to claim DTAA 

• NRI requires to provision Tax Residency Certificate (TRC). 
• NRI will have to produce a Tax Residency Certificate from the country of residence. 
• A foreign national claiming a relief under DTAA is required to make an application in the home country to its tax authorities or to other designated authorities to obtain TRC.

Which Methods NRI Can Use to Avail DTAA benefits?

Following methods can be used by NRI to claim DTAA benefits.

Tax Credit

Tax Credit method is used to claim benefit in the country of residence. In this method, a taxpayer needs to add all income from foreign sources into total taxable from the resident country and calculate applicable income tax. Based on the law applicable in that country a person can claim the tax credit.

Tax Exemption

This method is claiming relief in any one country. In this method, a taxpayer is allowed to claim his income from foreign sources under tax exemption. It is a method to eliminate the complete scenario of double taxation.

Deduction

The third method is the deduction method in which the taxpayer pays the tax in the country where income is earned and get subtracted from the global income in the country of residence. The tax is calculated on the difference and paid in the country. This method does not eliminate double taxation completely, that’s why it is the less popular method.

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