Double Taxation Avoidance Agreement (DTAA)

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Double Taxation Avoidance Agreement (DTAA)

India has entered into Double Taxation Avoidance Agreements with 88 countries, of which agreements with 85 are currently in force, aiming to ensure the same income or asset is not taxed twice in different jurisdictions. These treaties foster cross-border investment and economic collaboration by clarifying where specific types of income, such as dividends, interest, royalties, and capital gains, are taxed and how tax credits are applied.

These treaties allocate taxing rights, on dividends, interest, royalties, capital gains, between the source country and the country of residence, ensuring income isn’t taxed twice.
In the absence of a DTAA, India offers unilateral relief (Section 91); with a treaty, bilateral relief (Section 90) applies.
Withholding tax rates under DTAAs, typically between 10–15%, are lower than standard domestic rates for cross-border payments.
Recent treaties (e.g., India–Oman, effective May 2025) now include the Principal Purpose Test (PPT) to prevent misuse, expanded permanent establishment norms for digital operations, and provisions against non-discrimination.
To claim treaty benefits, non-resident recipients must provide a valid Tax Residency Certificate (TRC) and PAN; otherwise, Indian payers are required to apply standard domestic withholding rates.

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