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NRIs can avoid paying double tax as per the Double Tax Avoidance Agreement (DTAA). Usually, Non-Resident Indians (NRI) live abroad, but earn income in India. In such cases, it is possible that the income earned in India would attract tax in India as well as in the country of the NRI’s residence. This means that they would have to pay tax twice on the same income. As a measure to avoid this, the Double Tax Avoidance Agreement (DTAA) was amended.
The Double Tax Avoidance Agreement is a treaty signed by two countries. The agreement is signed to make a country an attractive destination as well as to enable NRIs to get relief from having to pay taxes multiple times. DTAA does not mean that the NRI can completely avoid taxes, but it does mean that the NRI can avoid paying higher taxes in both countries. DTAA does allow an NRI to cut down on their tax implications on the income earned in India. DTAA also reduces the instances of tax evasion.
DTAA, signed by India with different countries, fixes a specific rate at which tax has to be deducted on income paid to residents of that country. This means that when NRIs earn an income in India, the TDS applicable would be according to the rates set in the Double Tax Avoidance Agreement with that country.
Countries that India has a DTAA with
India has signed a Double Tax Avoidance Agreement with most major nations where Indians reside. Some of these countries are:
| Country | DTAA TDS rate |
| United States of America | 15% |
| United Kingdom | 15% |
| Canada | 15% |
| Australia | 15% |
| Germany | 10% |
| South Africa | 10% |
| New Zealand | 10% |
| Singapore | 15% |
| Mauritius | 7.5% to 10% |
| Malaysia | 10% |
| UAE | 12.5% |
| Qatar | 10% |
| Oman | 10% |
| Thailand | 25% |
| Sri Lanka | 10% |
| Russia | 10% |
| Kenya | 10% |
Under the Double Tax Avoidance Agreement, NRIs don’t have to pay tax twice on the following income earned from:
If income from these sources is taxable in the NRI’s country of residence, they can avoid paying taxes on it in India by availing the benefits of DTAA.
The benefit of DTAA can be used by two methods:
The income on which a NRI can claim tax exemption/credit will be mentioned in the DTTA with the resident country. The provisions of DTAA are not the same for all countries.
