HOW CAN AN NRI AVAIL BENEFITS UNDER DTAA?


NRIs (Non-Residential Indians) can avail tax benefits under the DTAA (Double Tax Avoidance Agreement). In most of the cases, NRIs live abroad but also earn an income in India. In these cases, they have dual source of income and there is a high probability that they will have to pay taxes on the income earned in India, both in India as well the NRI’s resident country. This will lead to twice the payment of tax on the same income. However, this can be avoided under the Double Tax Avoidance Agreement (DTAA). This benefits the NRIs.

The Double Tax Avoidance Agreement is a pact which is signed by two countries. The agreement comes with two major benefits. The signing of the treaty makes one of the countries an attractive tourist destination and the NRIs are exempted from having to pay taxes multiple times. With the help of DTAA, the NRIs do not completely avoid tax; rather they avoid paying higher taxes in both the taxes. The Double Tax Avoidance Agreement benefits the NRIs to cut down their tax implications on the income earned in India. The DTAA also reduces the cases of tax evasion.

India has carried out DTAA with different countries le USA, UK, Canada, Australia, etc. In this specific rates are fixed at which TDS (Tax Deducted at Source) would be deducted on income paid to the residents of that country. Therefore, if an NRI has a source of income in India too, the applied TDS would be in accordance with the rates set in the DTAA with that particular country.

Under the Double Tax Avoidance Agreement, NRIs would be exempted from paying double tax if they have any of the following sources of income in India:-
-          Services provided in India
-          Salary received in India
-          House property in India
-          Money gained on transfer of assets in India
-          Fixed Deposits (FDs) in India
-          Savings bank account in India

There are two methods to avail the benefits of DTAA-
1.       Tax Credit: Using this method, you can claim tax benefits in the country of residence.
2.       Exemption: With this one, tax benefits can be claimed in any one of the two countries.

RNS Associates is the leading CA in Dehradun. Contact us for Taxation consultancy in Dehradun!
Location: Dehradun, Uttarakhand, India

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