Double Taxation Avoidance Agreement (DTAA)

DTAA stands for ‘Double Taxation Avoidance Agreement’ or ‘Tax Treaty’. Central Govts enters into double taxation avoidance agreements with foreign countries or specified territory for granting relief, avoidance of double taxation, exchange of information for preventing evasion or avoidance of tax or for recovery of tax Need for DTAA To avoid the double taxation of an income in the hands of a person, the Double Taxation Avoidance Agreements (DTAA) between the countries (‘Contracting States’) allocate the taxing right to the residence country and the source country. The Articles of the DTAAs decide which of the two Contracting States shall levy tax on incomes specified under the Articles of the DTAAs. Where the residence state gets the right to tax, the same income will not be taxed twice. However, where the source country gets the right to tax the income, double taxation arises as the same income may also be taxable in the residence country. In such cases, double taxation is avoided by giving credit for taxes paid in the source state by the residence state.

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GLOSSARY

GLOSSARY

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