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DTAA (Double Taxation Avoidance Agreement)

A tax treaty between India and another country that stops the same income being fully taxed twice — usually by giving one country the first right to tax it, or by crediting tax already paid in the other.

India has signed a Double Taxation Avoidance Agreement, or DTAA, with most countries its residents live in, under 2025 Act s. 159was s. 90. The point of a DTAA is straightforward: without one, the same income could be taxed in full twice — once by India, because it arose there, and again by your country of residence, because you’re taxed there on your worldwide income. A DTAA fixes that, usually in one of two ways: it gives one country the primary right to tax a particular kind of income (sometimes at a capped rate), and lets the other country give you credit for the tax already paid, or it exempts the income in one country altogether.

What it covers

Each DTAA sets its own rates and rules for different kinds of income — interest, dividends, royalties, capital gains, pensions, salaries — and they differ from treaty to treaty. The India–US treaty doesn’t say the same thing as the India–UK or India–UAE treaty, so the answer for a UK resident isn’t the answer for someone in the US, even for the same kind of Indian income.

Claiming the benefit

A DTAA doesn’t apply automatically just because you’re a tax resident of a treaty country. You generally need to:

  • Get a Tax Residency Certificate (TRC) from your country of residence, proving you’re resident there for the year.
  • File the additional information the Indian rules ask for alongside your TRC.
  • Claim the treaty rate in your Indian return, rather than just paying the default rate and hoping it works out. The credit for Indian tax goes in your return in the country where you live.

Skip the paperwork, and the payer or the tax department has no way to know you’re entitled to the treaty rate — you’ll be taxed at the ordinary domestic rate instead, and have to claim a refund later if you’re entitled to less.

Also called: Double Taxation Avoidance Agreement, tax treaty

See also

Where it matters

Sources

  1. Income-tax Act, 2025 (e-Gazette)egazette.gov.in
  2. Income Tax Department of India: Section 159, agreements for double taxation reliefincometaxindia.gov.in
  3. Income Tax Department of India: DTAA textsincometaxindia.gov.in