Question

Q. With regards to Double Taxation Avoidance Agreements (DTAA), consider the following statements:

Which of the statements given above is/are correct?

• A. 1 only
• B. 2 only
• C. 3 only
• D. 1 and 2 only

Answer 1

The correct option is D 1 and 2 only

Explanation:

• Statement 1 is correct: Double Taxation Avoidance Agreements (DTAA) is a treaty signed between two or more countries and is applicable in cases where a taxpayer residing in one country has to earn his/her income from another country. India has signed Double Taxation Avoidance Agreements or DTAAs with 88 countries, out of which 85 have become effective.
• Statement 2 is correct: The countries under the DTAA are provided relief from double taxation. Relief on double taxation is provided by the exemption of incomes earned abroad from tax in the resident country or by providing credit to the extent of taxes that have already been paid abroad.
• Statement 3 is incorrect: In some cases, the DTAA also provides concessional rates of tax. For instance, interest on NRI bank deposits attracts 30 percent TDS (tax deduction at source) here. But under the DTAAs that India has signed with several countries, tax is deducted at only 10 to 15 percent. Many of India’s DTAAs also have lower tax rates for royalty, fees for technical services, etc.