India’s Double Taxation Avoidance Agreements

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Mar. 26 – Double taxation avoidance agreements (DTAs or DTAAs) aim to prevent the same income from being taxed by two or more states, while also eliminating tax evasion and encouraging cross-border trade efficiency. DTAs prevent double taxation by allowing the tax paid in one of the two countries to be offset against tax payable in the other country, and/or by providing exemptions or reduced tax rates for specific income types such as interest, royalties, dividends. In India, withholding tax on dividends is 0 percent per the Tax Act, but DTAs serve to reduce interest and royalty rates.

The table below reflects India’s double taxation avoidance agreements (DTAAs) in effect. In certain cases (such as in the case with states from the former Soviet Union), rates represent treaties between groups of countries. In cases in which a treaty does not specify a maximum withholding tax rate, or the maximum rate specified in a treaty is higher than the domestic withholding tax rate, the domestic rate applies.

This article was extracted from the new issue of the India Briefing Magazine, titled “India’s Taxes for Foreign-invested Entities.” In this issue, we provide an overview of India’s taxes on business, which includes a section on India’s double taxation avoidance agreements, and then discuss individual income tax rates and deductions.

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