What is a Double Taxation Avoidance Agreement?
What if someone earning income in two or more countries ,think what will be tax liability of such person in such two or more countries in a financial year ?—lets assume Rishabh lives in India but works remotely for a company in Germany. Without any agreement in place, both India and Germany could tax the same income. That’s double taxation—and it’s not just frustrating, it’s unfair.
To solve this, countries sign Double Taxation Avoidance Agreements (DTAAs). These are treaties that ensure you don’t pay tax twice on the same income. The goal is simple: protect taxpayers, promote cross-border trade, and encourage investment.
India’s DTAAs typically follow the UN Model Convention, which balances the rights of both the country where income is earned (source country) and the country where the taxpayer lives (residence country). These agreements define:
- Which country gets to tax specific types of income (like salary, interest, royalties, etc.)
- How much tax can be charged (often at reduced rates)
- Whether income is exempt in one country or if tax paid abroad can be credited in India
For example, if Rishabh an Indian resident earning interest from a U.S. bank, the DTAA between India and the U.S. may allow you to pay tax only in one country—or get credit for tax paid in the other.
It’s a win-win: you avoid double taxation, and both countries maintain fair tax systems.
Countries with DTAA Agreements with India
India has signed comprehensive DTAAs with over 90 countries, including:
| Country | Year of Signing |
|---|---|
| United States | 1989 |
| United Kingdom | 1993 |
| Germany | 1995 |
| France | 1992 |
| Australia | 1991 |
| Canada | 1996 |
| Singapore | 1994 |
| UAE | 1992 |
| Bangladesh | 1991 |
| Nepal | 1987 |
| Japan | 1989 |
| Mauritius | 1983 |
| Netherlands | 1989 |
| Switzerland | 1994 |
| South Africa | 1996 |
India also has limited agreements with countries like Afghanistan, Maldives, and Yemen.