The Indo-US Double Taxation Avoidance Agreement (DTAA) is an agreement signed by the governments of India and the United States to prevent the double taxation of income earned by individuals or companies in both countries. The agreement was first signed in 1989 and has been revised several times since then.
The basic principle of the Indo-US DTAA is that a resident of one country will not be taxed twice on the same income by both countries. This means that if an individual or company earns income in India, they will not be taxed on that income in the US, and vice versa.
The agreement also includes provisions for the exchange of information between the two countries to prevent tax evasion and improve tax compliance. This information exchange is intended to help both countries to ensure that taxpayers are meeting their tax obligations in both countries.
The Indo-US DTAA covers a wide range of types of income, including income from employment, business profits, dividends, interest, royalties, and capital gains. It also provides for various exemptions and deductions, which may vary depending on the type of income and various other factors.
One key aspect of the Indo-US DTAA is the definition of the term “permanent establishment.” This term refers to a fixed place of business that a company has in another country. The definition of permanent establishment is important because it determines whether a company is subject to taxation in a particular country.
In conclusion, the Indo-US DTAA is an important agreement that helps to prevent double taxation of income earned by individuals and companies in both India and the United States. The agreement also provides for the exchange of information to improve tax compliance and prevent tax evasion. The provisions of the agreement are complex and may vary depending on a number of factors, so it is important for individuals and businesses to consult with tax professionals to ensure compliance with the agreement.