The Types of Double Taxation[ edit ] There are two types of double taxation: International double taxation agreements[ edit ] Main article:
A Double taxation avoidance agreement or DTAA is a government level agreement, where taxation in one country is recognized by the other country. Thus, tax paid in one country is taken into account for the tax liability in the other country.
To give relief to the tax payers, the governments of the U. The DTAA can come into affect in the following ways: Exemption Method — Here, the country of residence exempts the income earned in the foreign country.
Deduction Method — Here, tax paid in the country of source of income is deducted from the global income and then from the residual amount the tax is paid Tax Credit Method — Here, the country of residence gives credit of the taxes paid in the foreign country.
This can also be sub divided into: As per the Indian Income tax laws a resident is a person who has been in India for a period of days or more in the financial year or who has been in India for 60 days or more in a financial year and days or more in the 4 years before the particular financial year.
Under the tax laws of the U. If a person is not a citizen, a person is considered non resident alien, unless he satisfies one of the two tests, to qualify as a resident alien: Green Card test — A test based on the immigration laws to determine the residency status, or Substantial presence test — A test based on numerical formula, which measure the days you are present in the U.
There can be scenarios where one person used to be a resident of U. In both scenarios, the taxes are payable in both U.
Steps to claim the benefit from DTAA: Check the DTAA status between the countries. In the case of India and teh U.Agreement for Avoidance of Double Taxation and prevention of fiscal evasion with Armenia Whereas the annexed Convention between the Government of the Republic of India and the.
Australia: Comprehensive Agreements.
How is it beneficial to Indian citizens? Update Cancel. the respective governments enter into agreement,defining tax residency, tax rates, where particular income shall be charged to tax etc, so that a particular income is not taxed in both countries.
Double Taxation Avoidance Agreement as the name suggests helps you in avoiding. Double taxation is a taxation principle referring to income taxes paid twice on the same source of earned income. It can occur when income is taxed at both the corporate level and personal level.
Feb 27, · Ans. Double Taxation Avoidance Agreement is an agreement made between two or more countries to avoid the Double taxation on the same Income.
Countries come together & mutually agree not to tax the same income twice. Though signing double taxation avoidance agreement is a way to solve the tax problems, there still can be other problems led out, or we can call it "side effect".
The intention of tax treaties is to avoid or eliminate double taxation. section 90 of the income-tax act, - double taxation agreement - agreement for avoidance of double taxation and prevention of fiscal evasion with foreign countries – south. aden rules, other agreements.