The Double Tax Avoidance Agreement (DTAA) between India and Australia is an initiative by the Indian Government to ensure persons resident of India, Australia, or both are safe from being taxed twice. Under this agreement, taxes paid in one country can be claimed as a credit in another country, ensuring that tax is effectively paid in only one country. DTAA allows various types of tax relief and deductions. The Indian Government has signed an agreement with almost 100 different countries worldwide. This agreement protects Indian citizens and Non-Residents (NRIs) from being taxed twice on the same income.
This article will discuss the effectiveness of the DTAA between Australia and India and the taxes that apply under this agreement.
DTAA between Australia and India is an agreement to counter the double taxation issue. Australia signed this agreement on the 30th day of December 1991. The articles under this agreement apply to all types of personal and corporate income sources. Different types of taxes and interest rates are mentioned in this agreement. Both countries are responsible for maintaining the rules and regulations under DTAA.
Although this agreement applies to the geographical region of Australia, the following regions are excluded according to Article 3 of the agreement:
Although DTAA is there, there is the presence of an anomaly; the ‘Deemed Source’ rule of Australia makes all earnings by Indian citizens taxable if they are from an Australian source. Keeping these contradictions in mind, recently an amendment has been proposed by India to Australia with regard to their domestic taxation laws to ensure that NRIs are not taxed twice.
The Australian parliament agreed to the proposed amendment in 2022. This amendment is related to the earnings from the offshore services provided to the Australian citizens by the Indian citizens, which were taxable by the Australian domestic income tax laws.
Since paying taxes is mandatory in most nations, double taxation is an inevitable issue for residents who earn from foreign countries. Both India and Australia have agreed to set a set of tax rules to make sure that Indian citizens are paying their income taxes fairly. Here is how the Indian Australia DTAA is significant:
Under Double Taxation Avoidance Agreement between India and Australia, an array of taxes have been covered:
Taxes that are covered in Australia are:
Taxes which are applicable in India are:
Apart from these, other taxes which are substantially similar to these types of taxes also fall under the India Australia DTAA.
As per Articles 9, 10 and 11 of the agreement, the dividend and interest may be taxed in the country where it arises provided the tax rate on such income shall not exceed 15%. In line with tax rates, the TDS rates shall not exceed the said tax rate.
Royalties, as Article 12 defines them, are also eligible for reduced tax rate of 15% . Indian Australia Double Tax Avoidance Agreement assures the taxpayers that they won’t be taxed more than 15% of the gross income from dividends, royalties or other income sources.
Capital gains are also taxed under Indian Australia DTAA as per Article 13 of the agreement. Rules applicable to any kind of capital gains from any movable or immovable properties are as follows:
Australia uses the term “Real Property” where in India the same is called as immovable property. The Real Property includes a lease land, right receive consideration for extraction of mineral or other deposits, oil or gas well or such other minerals
DTAA for income by way of letting out of an immovable property shall be taxed in the country where such property is located.
India Australia DTAA is extremely important due to the regulations it has laid out to control unfair taxation of income of Non-Resident Indians (NRIs) and Indians earning in Australia. Although there are some disputes because of contradictory domestic and international laws, DTAA manages to smoothly run the global workforce by ensuring one-time taxation on international earnings.
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