Basic Concepts of International Taxation DOUBLE TAXATION AVOIDANCE AGREEMENT

Posted on 22-03-2016        By ADMIN

Basic Concepts of InternationalTaxation

Globalization– Trade/ transactions and business has gone beyond borders - Our economy hasbecome robust and business has sprung up where FII investments in India havebecome ROBUST.

Issueslike DTAA, Subpart F, WTO, transfer pricing, tAx havens has to be taken care ofand they have become an important and integral part of INTERNATIONAL REGIME.

WTO– Merging international business, nil or qualitatively less restrictions.

DOUBLE TAXATION AVOIDANCE AGREEMENT – an importantconsideration of international business.

Situationof double taxation arrises when an income is taxed twice

Resident of India

Earning abroad

World wide income principle


Earning in India

Source principle


“OECDstand for Organisation for economic co operation and development”

Double Taxation means “the impositionof comparable taxes in two or more states on the same tax payer in respect ofthe same subject matter and for identical periods”

 Unilateralmeasures and bilateral measures

Sec 90 – Agreement between govt of Indiaand the govt of other countries

Sec 91 – Provisions where Indian govt doesnot have any agreement with the govt of other countries

Sec 90A – Agreement with specifiedassociation.


Agreement with other countries andspecified association for

1.      2.      3.      4.      5.       




Provisions where Indian Govt is not havingany agreement with other country – Tax payer get deduction from total Incometax liability in India calculated on such doubly taxed Income. Income tax iscalculated at Indian Tax rate or tax rate in that foreign country, whichever is lower.

Indiantax Rate is appicable if both the tax rates are equal.

Tax calculated at Indian Tax rate = Tax onTotal  Incomein India*Doubly Taxed Income Total Incomein India

Incomein India

Tax calculatedat other countries Tax rate =

 TaxPaidinForeign  Currency *DoublyTaxedIncomeTotalIncomeinForeignCountry                                             IncomeinForeignCountry 


1.      2.      3.      4.      Helps deciding numerous taxdisputes and removes uncertainities and ambiguity


Taxation ofIncome from air and shipping transport under DTAA – Income will be taxed in thecontracting State where the place of effective management of enterprise issituated. 

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