DOUBLE TAXATION AVOIDANCE AGREEMENT
Anindividual who earned income has to pay income tax in the country in which theincome was earned and also in the country in which such person was resident. Assuch, the liability to tax on the aforesaid income does arise in the country ofsource and the country of residence. In order to avoid the hardship of doubletaxation, Government of India has entered into Double Taxation AvoidanceAgreements with several countries. DTAAs taken care of technical know-how andservice fees reduced rates of tax on dividend, interest, and royalties receivedby residents of one country from other. When the rate of tax is higher in theIndian Income Tax Act, 1961 than the rate prescribed in the DDTA, then the rateprescribed in the DDTA shall be applied i.e. the rate which is better to thetaxpayer would be applied.