Double Taxation Avoidance Agreement: What Does It Cover And How You Can Benefit
Double taxation means tax levied on a person in more than one country for an income, item, or service purchased, so the taxation treaties help prevent double taxation.
Double taxation means tax levied on a person in more than one country for an income, item, or service purchased, so the taxation treaties help prevent double taxation.
Double Taxation Avoidance Agreement
A person who earns his salary from a foreign company could be taxed in the home country and the country where the employer is located. Many countries have signed Double Taxation Avoidance Agreements (DTAA) to avoid this situation for their citizens and entities.
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Section 90 of the Income-tax Act, 1961 defines double taxation avoidance agreements. The section pertains to tax provisions for incomes, like salary, capital gains, interest and dividend income, etc., earned from a foreign country. The agreements provide guidelines about the types of income and the rates to be levied. These pacts agree on the tax rates, such as the rate for income earned from sources in India and the tax in another country on the income earned there. Note that the DTAA rates and rules are different from one to another. As per the State Bank of India website, India has signed DTAA agreements with more than 90 countries, including the US, UK, UAE, Germany, France, Singapore, Canada, and Australia.
Also Read: Why You Should Get Inflation, Return Rates Correct For Building A Retirement Corpus
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It applies to Non-Resident Indians (NRIs). DTAA agreements help people earn income outside India without facing double taxation. However, in some instances, the provisions do not apply. DTAA is not applicable in the case of:
Also Read: 75% Of Senior Citizens In India Suffer From Chronic Diseases; Prevention Methods To Tackle Them
Straightforward taxation and avoidance rules help NRIs save taxes and avail of other allied benefits. For example, lower tax rates in a country result in tax savings. Clarity on tax norms and rates offers opportunities for better financial planning for various types of income, including business and investment planning. It strengthens the taxation space, and clear rules help curb tax evasion. A well-defined DTAA helps people take up foreign endeavours, improve their economic conditions, and grow. To benefit from these provisions, NRIs should know the DTAA rules.
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There are various ITR forms that taxpayers can use for different purposes. To avoid mistakes, senior taxpayers should choose the appropriate ITR form for various tax filing purposes.
Two categories of capital gains tax apply to property: LTCG and STCG; however, there are situations when an individual isn’t required to pay capital gains tax.
Every penny counts when it comes to saving money during your retirement. So, tax savings can be crucial for seniors when it comes to saving money and living a financially healthy life.
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