1.Introduction:

The Double Tax Avoidance Agreement (DTAA) is a tax treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income.
DTAAs can be either be comprehensiveor limited to certain areas, which means taxing of income from shipping, inheritance, air transport, etc
India presently has DTAA with 80+ countries, with plans to sign more in future.

To summarize, these Tax treaties are agreements entered between two countries, with the view and agree to:-
-Avoid double taxation on the same income earned by the a person.
-Provide relief for taxes paid in the other treaty country
-Promotion of cross border trade through elimination of double taxation.

Advantages of DTAA

The intent behind a Double Tax Avoidance Agreement is to make a country appear as an attractive investment destination by providing relief on dual taxation. This form of relief is provided by exempting income earned in a foreign country from tax in the resident nation or offering credit to the extent taxes have been paid abroad.

Example:
Mr. Dhoni is asked to go to USA to play match against USA and receive payments during the period away from home. The income earned may be subject to tax in both the countiries. Hence, considering the benefits of the DTAA between India and USA, Mr. Dhoni can claim relief at the time of filing of tax return for that year. We can also say, if Mr. Trump, a non resident Indian, have made investment in India, there may be DTAA provisions that apply to income from such investments. In some cases, DTAAs are allowed for concessional rates of Taxes. For Instance, interest earned on NRI bank deposits attract TDS @30%. However, under the DTAAs that India has signed with other countries, tax is deducted at 10-15%.

Under DTAA, NRIs do not have to pay tax twice on the income earned from:

• Services that are provided in India
• Salary that is received in India
• Fixed deposits held in India
• House property situated in India
• Capital gains following transfer of assets in India
• Savings bank account held in India.

How can the benefit of DTAA be used?

Tax Credit: Under this Method, tax relief can be claimed in the country of residence.
Exemption: Under this Method, tax relief can be claimed in any one of the two nations.

Analysis of the DTAA/Tax Treaties

The whole DTAA between India and the other countries are classified among Article ranging from 1 to 30. Lets have an overview of the same:

Scope Provision
Article 1 : Personal Scope
Article 2 : Taxes Covered
Article 29: Entry into force
Article 30: Termination

Definition Provision

Article 3 :General Definition
Article 4 :Residence
Article 5: Permanent Establishment

Substantive Provision

Article 6 :Immovable Property
Article 7 :Business Profits
Article 8: Shipping etc,
Article 10: Dividend
Article 11: Interest
Article 12Royalty & Fees from Technical Services
Article 13: Capital Gains
Article 14: Independent Personal Services
Article 15: Dependent Personal Services
Article 16: Director
Article 17: Artists & Sports persons
Article 18: Pensions
Article 19: Government Services
Article 20: Students
Article 21: Other Income
Article 22: Capital Miscellaneous Provision
Article 24 :Non-Discrimination
Article 27 :Diplomats
Article 28: Territorial Extension

Procedure:
To benefits from the provisions laid under the DTAA, an NRI Individual will have to provide the following documents to the dedutor:-

1. Tax Residency Certificate (TRC) for the year.
2. Self-declaration-cum indemnity format
3. Self-Attested PAN Card Copy (If any)

According to the Finance Act 2013, an Individual will not be entitled to claim any benefit of relief under DTAA unless he or she provides a Tax residency Certificate to the deductor. To receive a Tax Residency Certificate (TRC), an application has to be made in Form 10FA (Application for certificate of residence for the purposes of an agreement under section 90 and 90A of the Income Tax Act) to the Income Tax Authorities. Once the application is successfully processed, the certificate will be issued in Form 10FB.

Important Forms under DTAA Regime:

On payment to any NRI two forms are required to be furnished to the Bank for the release of the Foreign payment.
1. Form 15CA
2. Form 15CB

Form 15CA:
1. Information to be furnished for payments to a non-resident not being a company, or to a foreign company has to be provided in Form 15CA
2. The Form 15CA is generally signed and acknowledged by the remitter.
3. Form 15CA has been categorized in to 4 Parts from A to D.

Part A: To be filled up if the remittance is chargeable to tax under the provisions of the Income-tax Act,1961 and the remittance or the aggregate of such remittances, as the case may be, does not exceed five lakh rupees during the financial year.

PART B – To be filled up if the remittance is chargeable to tax under the provisions of the Income-tax Act,1961 and the remittance or the aggregate of such remittances, as the case may be, exceeds five lakh rupees during the financial year and an order/ certificate u/s 195(2)/ 195(3)/ 197 of Income-tax Act has been obtained from the Assessing Officer

PART C – To be filled up if the remittance is chargeable to tax under the provisions of Income-tax Act, 1961 and the remittance or the aggregate of such remittances, as the case may be, exceeds five lakh rupees during the financial year and a certificate in Form No. 15CB from an accountant as defined in the Explanation below sub-section (2) of section 288 has been obtained.

PART D – To be filled up if the remittance is not chargeable to tax under the provisions of the Income-tax Act,1961 {other than payments referred to in rule 37BB(3)} by the person referred to in rule 37BB(2).

Form 15CB;
1.On exceeding the payment made to the NRI above Rs. 5 lacs, a certificate from an accountant is required. Generally, a Chartered Accountant has been authorized to provide such certificate in the Form 15CB.m
2.Definations
If income liable to tax in India relevant treaty is applicable.
3.Form to be filed Necessary
4.Chart for limits – 15CA/CB
5.Practical Guides & Examples

Every Foreign income is taxable in India. Any payment made to a Non resident is subject to TDS u/s 195. DTAA are the treaties formed between different coutiries to avoid the double taxation of the same income by two diferent countries.

Section 90(2) provides : :…… in relation to the assesse to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assesse”
Treaty has overriding seniority over domestic laws, if in beneficial /opted by the assesee