Nov. 21 – India has initiated the process to revise its double taxation avoidance agreements (DTAs) with over 75 countries in an effort to strengthen its legislative framework to control the black money generated domestically and the flow of such illegal funds to foreign countries.
On October 26, India signed a protocol to amend the existing 19-year-old DTA with Spain to facilitate the exchange of information for its tax evaders.
“The protocol is expected to stimulate the effective exchange of information and enable assistance in the collection of taxes between India and Spain. It will reduce obstacles in mutual cooperation between the two countries and also prevent the abuse of the benefits of the Convention,” the Finance Ministry said in a press release.
Another protocol for amending the current DTA with the United Kingdom was inked in London on October 30, which alters the provisions relating to information exchange and taxation of dividends in both countries.
The protocol provides that the withholding tax rate for dividends will be either 10 percent or 15 percent, and will be equally applicable in both the UK and India. The protocol further enables tax authorities in the two countries to exchange banking information and supply information irrespective of domestic interests. Information may also be shared with other agencies after obtaining the consent from the supplying state.
Moreover, a new article has been incorporated to assist the collection of taxes, and both countries will join in a Memorandum of Understanding to speed up the exchange of information and strengthen assistance in tax collection.
The amended DTA is expected to provide tax stability to the residents in both countries while simultaneously promoting mutual economic cooperation between the two economies. It is also hoped that these measures will help stimulate the bilateral flow of investment, technology and services, according to the Finance Ministry.
The recent efforts of the Indian government in amending DTAs with different countries have increased the inflow of information from foreign countries. The government has received financial transaction details of its nationals from banks in several foreign countries, and such information can help the government save hundreds of crores in tax recovery.
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