Double Taxation Avoidance Agreement (DTAA) | Savlana Init

International Tax & Estate · Treaty Relief

Double Taxation Avoidance — Taxed Once, Not Twice.

India has treaties with more than ninety countries, and each one allocates taxing rights article by article. Claiming the relief takes a certificate, a form and a filing deadline.

A Double Taxation Avoidance Agreement is a bilateral treaty that allocates taxing rights over each category of income between the two contracting states. India has concluded comprehensive agreements with more than ninety countries, and Section 90(2) of the Income Tax Act gives the taxpayer the more beneficial of the treaty and the domestic law — the treaty cannot worsen your position, only improve it. Where no treaty exists, Section 91 provides unilateral relief by way of credit for foreign tax on doubly taxed income.

The treaties follow a common architecture. Article 4 determines residence and supplies the tie-breaker sequence — permanent home, centre of vital interests, habitual abode, nationality and, failing all of these, mutual agreement between the competent authorities. Article 5 defines permanent establishment and Article 7 taxes business profits only where one exists. Articles 10, 11 and 12 cap the rate on dividends, interest, royalties and fees for technical services in the source state. Article 13 allocates capital gains, Articles 14 to 20 deal with personal services, directors, artistes, pensions and students, and the relief article specifies whether double taxation is eliminated by exemption or by credit.

Claiming relief is procedural as much as substantive. Section 90(4) requires a Tax Residency Certificate from the other state, and Section 90(5) read with Rule 21AB requires Form 10F, now filed electronically on the income tax portal. Payers routinely ask for a declaration of beneficial ownership and absence of a permanent establishment before applying a reduced rate. On the credit side, Rule 128 governs foreign tax credit and requires Form 67 with evidence of foreign tax payment, filed within the prescribed time. Several treaties are additionally modified by the Multilateral Instrument, which introduced a principal purpose test that denies benefit where obtaining it was a principal purpose of the arrangement. We handle the analysis, the documentation and the filings together.

Our DTAA Services

Treaty Applicability Opinion

Identification of the applicable treaty, the relevant articles for each income stream, and whether the treaty or domestic law gives the better outcome.

Residence and Tie-Breaker Analysis

Determination of treaty residence where both states treat you as resident, applying the Article 4 tie-breaker sequence on documented facts.

Reduced Rate Claims at Source

Assembly of the documentation that lets a payer apply the treaty rate at the time of payment rather than deducting at the domestic rate.

Tax Residency Certificate Support

Guidance on obtaining the certificate from the other jurisdiction and on the particulars it must carry to be accepted in India.

Form 10F Filing

Electronic filing of Form 10F on the income tax portal, including for non-residents without a PAN under the available route.

Foreign Tax Credit — Form 67

Computation of credit under Rule 128 and filing of Form 67 with the statement of foreign income and proof of tax payment, within time.

Section 91 Unilateral Relief

Relief where no treaty exists with the source country, computed at the lower of the Indian rate and the foreign rate on the doubly taxed income.

MLI and Anti-Abuse Review

Assessment of how the Multilateral Instrument and the principal purpose test affect an existing structure or a proposed transaction.

Our Process

Income and Residence Mapping

We identify each cross-border income stream, its source state, and your residence position in both countries for the relevant period.

Article Application

Each stream is matched to its treaty article, the source-state rate cap is applied, and the result is compared against domestic law.

Documentation Assembly

The Tax Residency Certificate, Form 10F, beneficial ownership and no-permanent-establishment declarations are obtained and provided to payers.

Relief Execution

Reduced rates are claimed at source where possible, and foreign tax credit is claimed in the return with Form 67 filed within the prescribed time.

Review and Defence

The position is documented contemporaneously and defended where an assessing officer challenges residence, characterisation or credit.

Why It Matters

✓The more beneficial of treaty and domestic law, applied deliberately

✓Reduced source-state rates on dividends, interest, royalties and FTS

✓Treaty residence settled where two countries both claim you

✓Business profits protected where no permanent establishment exists

✓Foreign tax credit secured by filing Form 67 on time

✓Form 10F filed electronically, as the portal now requires

✓Section 91 relief claimed where no treaty exists at all

✓Principal purpose test exposure assessed before structuring

Frequently Asked Questions

In two ways. Distributive articles allocate taxing rights — some income is taxable only in the residence state, some only in the source state, and some in both with the source state’s rate capped. Where both may tax, the relief article requires the residence state to eliminate double taxation, usually by allowing credit for the tax paid in the source state, and occasionally by exempting the income.

Section 90(2) provides that where an agreement applies, the provisions of the Act apply only to the extent they are more beneficial to the taxpayer. So the taxpayer takes whichever is better, article by article and stream by stream. The treaty cannot be used to impose a higher burden, and it cannot be invoked selectively within a single computation to combine the best of both in an artificial way.

A Tax Residency Certificate issued by the tax authority of your country of residence for the relevant period, Form 10F filed electronically on the Indian portal, and generally a declaration of beneficial ownership and of the absence of a permanent establishment in India. A PAN is also expected, failing which Section 206AA can apply unless the Rule 37BC relief is available.

Where both countries treat an individual as resident under their domestic law, Article 4 applies a sequence: the state in which he has a permanent home available; if in both or neither, the state with which his personal and economic relations are closer; then habitual abode; then nationality; and finally resolution by mutual agreement between the competent authorities. Each step is tested only if the previous one does not settle the question.

Section 91 provides unilateral relief. A resident who has paid tax in a country with which India has no agreement is entitled to a deduction from Indian tax on the doubly taxed income, computed at the Indian rate or the rate of tax in the other country, whichever is lower. The relief is narrower than treaty relief and the evidentiary requirements are the same.

Almost always for procedure rather than substance — Form 67 not filed, filed late, or filed without the statement of foreign income and proof of payment that Rule 128 requires. Credit is also restricted to the Indian tax attributable to the doubly taxed income, so foreign tax exceeding that ceiling is not refundable in India. Both problems are avoidable if the credit is planned when the return is prepared rather than afterwards.

Paying tax on the same income in two countries?

Send us the income details and both tax positions. We will identify the treaty article that applies, claim the reduced rate or the credit, and file the forms within time.