Capitalising on the Benefits of Double Tax Treaties in India

Double Tax Treaties in IndiaCurrently, 94 countries have an accord with India on taxable income matters. These agreements are known as double tax treaties in India, and they provide tax relief measures. Double taxation treaties are a great tool to foster international collaborations. While it does not preclude paying taxes, it does put a cap on taxable income.

However, double taxation often lacks clarity and uniformity, while the legal framework is frequently complex. Navigating this ever-changing landscape can be tricky, and things can often go awry despite your best efforts. The best recourse is to hire professionals with experience in these areas, such as 3E Accounting India.


What is Double Taxation?

Double taxation signifies a levy that arises twice on the same income. This usually occurs when a business or individual of one country earns an income in a foreign country. It can also happen when NRIs (Non-Resident Indians) earn an income from India but live abroad. The country of residence and the country of income have equal rights to levy tax on the revenue.

Double taxation acts as a deterrent toward doing business and having access to a global talent pool. It creates an unjust taxation regime that limits investment and hampers development and trade.

In India, double taxation is a significant issue for foreign businesses, nationals, and NRIs. The primary solution to this problem lies in Double Taxation Avoidance Agreements (DTAA) or treaties. To benefit from a DTAA, a business or individual will need a Tax Residence Certificate from the country of residence.


How Do Double Tax Treaties Work in India?

Double tax treaties in India ensure a fair taxation regime that fosters international cooperation and commerce. S90 of India’s Income Tax Act governs DTAAs and provides relief for unilateral or bilateral double taxation. In the absence of a DTAA or treaty, S91 provides other avenues.

However, DTAAs are not identical and depend on the terms that signatory nations agree upon. In some instances, there are also options to choose between the DTAA or domestic legislation. The choice usually depends on which one offers a more beneficial outcome.

Hence, double tax treaties vary in jurisdictions, applications, types of taxable income, and tax relief measures. They can include:

  • Protocols for exchange of information, investigation, or settlement
  • Tax payment to occur in the country of residence
  • Withholding tax to apply in the country of income (deduction at the source)
  • Specific nature of avoidance, i.e., tax credit or tax exemption



Entrepreneurs seeking to benefit from double tax treaties in India will fare better with expert assistance. 3E Accounting India is a specialist in this area and others, including company set-up, corporate secretarial services, etc. Our professionals come with global experience and local expertise to ensure a seamless engagement.

As a one-stop business solutions firm, all our packages, from ideation to implementation, are customisable. Get in touch with 3E Accounting India today and discover the best ways to manage your taxation concerns.

Double Tax Treaties in India