Question

Q6. Consider the following statements:

1. DTAA is a tax treaty signed between countries (or any two/multiple countries) so that taxpayers do not pay double taxes on their income earned from source country as well as their residence country.

2. The need for DTAA arises out of imbalance in tax collection on global income of individuals.

Which of the above statement(s) is/are correct?

• A. a) 1 only
• B. b) 2 only
• C. c) Both 1 and 2
• D. d) None of the above

Answer 1

The correct option is C

c) Both 1 and 2

Double Taxation Avoidance Agreement (DTAA)

• DTAA is a tax treaty signed between countries (or any two/multiple countries) so that taxpayers do not pay double taxes on their income earned from source country as well as their residence country. So far, India has signed double tax avoidance treaties with more than 80 countries around the world.
• The need for DTAA arises out of imbalance in tax collection on global income of individuals. person aims to do business in foreign country, he may end up paying income taxes in both countries i.e. in the country where income is earned and country where individual holds his citizenship or residence. DTAA helps to taxpayers to do away issues of paying double taxes.