THE LINBUZ INSIGHTS
AVOIDING DOUBLE TAXATION: HOW DTAA BENEFITS NRIS
“NRIs, Stop Paying Twice!”
For Non-Resident Indians (NRIs) earning income both in India and abroad, taxation can often become a complex issue—especially when the same income is subject to tax in two countries. This situation, known as double taxation, can significantly reduce your net earnings. Fortunately, India offers relief through the Double Taxation Avoidance Agreement (DTAA), a legal mechanism designed to prevent this issue.
What is DTAA?
The Double Taxation Avoidance Agreement is a bilateral treaty signed between India and over 90 countries, including the USA, UK, UAE, Singapore, Australia, and Canada. Its primary objective is to ensure that the same income is not taxed twice—once in the country of residence and again in the country of source.
Key Benefits of DTAA for NRIs
- Eliminates Double Taxation
DTAA provides mechanisms to avoid or minimize double taxation on various types of income such as salary, interest, dividends, capital gains, and rent. - Provides Tax Relief Methods
Depending on the treaty with a specific country, relief is available through:- Exemption Method – Income is taxed in only one of the two countries.
- Tax Credit Method – Income is taxed in both countries, but tax paid in one country is allowed as a credit in the other.
- Reduced Withholding Tax Rates
Under DTAA, certain incomes earned in India (like interest, royalty, and dividends) are subject to lower tax deduction at source (TDS)—often as low as 10%, instead of the standard 30%. - Greater Financial and Tax Planning Certainty
DTAA provides clear rules on how cross-border income is taxed, enabling NRIs to manage their global finances more efficiently and avoid unintended non-compliance.
Types of Income Covered Under DTAA
- Interest income (e.g., from NRO accounts or Indian bonds)
- Dividends from Indian companies
- Capital gains on sale of Indian assets
- Salary earned while working in India
- Rental income from Indian properties
- Pension and annuities
Claiming DTAA Benefits in India
To claim DTAA benefits in India, NRIs must submit the following:
- A valid Tax Residency Certificate (TRC) from the country of residence
- A Form, along with a self-declaration of DTAA eligibility
- Ensure that relevant provisions are considered during income tax return filing or TDS deduction
NRIs: Claim What’s Yours — Save Taxes with DTAA
Conclusion
NRIs, Save Smart: Leverage DTAA to Avoid Paying Tax in Two Countries
For NRIs, the DTAA serves as a vital tool to ensure fair and efficient taxation of global income. By leveraging its provisions correctly, you can avoid double taxation, reduce TDS rates, and achieve better tax optimization. Professional advice and proper documentation are key to maximizing these benefits.
