Glossary · FEMA & International Tax
DTAA
Double Tax Avoidance Agreement — a bilateral treaty between India and another country to prevent the same income from being taxed in both jurisdictions.
India has DTAAs with over 90 countries, including the US, UK, Singapore, UAE, and Mauritius. DTAAs allocate taxing rights between the two countries for various types of income (business profits, salary, dividends, interest, royalties, capital gains) and provide for either exemption or credit of tax paid in one country. To claim DTAA benefits, the taxpayer must obtain a Tax Residency Certificate (TRC) from the home country and a PAN in India. DTAAs are crucial for NRIs, foreign companies, and cross-border investors.
Examples
An Indian company paying a ₹10 lakh dividend to a US shareholder can deduct tax at the lower DTAA rate of 15% instead of the regular 20% under Section 115A.