Withholding Tax Rates As Per DTAA

The Double Taxation Avoidance Agreement assists NRIs who work abroad in avoiding paying double taxes on income received in both their home country and India. India has this arrangement with 80 nations. In this article , we will learn all about ” Withholding tax rates as per DTAA”.

What does a DTAA (double taxation avoidance agreement) mean?

The Double Taxation Avoidance Agreement, often known as the DTAA, is a tax treaty that India has signed with another nation (or any two or more nations) to prevent taxpayers from having to pay taxes twice on income that they get from both their source and their origin countries. Double tax avoidance agreements exist between India and more than 80 nations at the moment.

The mismatch in tax collection on individual taxpayers’ worldwide income is what drives the demand for DTAA. If someone wants to start a business abroad, they may have to pay income taxes in both the country where the income is earned and the country where they are a citizen or have a place of residence. For instance, if you leave income sources like interest from deposits in India and move to a different country, both India and the country where you are currently residing will charge you interest based on your combined worldwide profits. In such a case, you can end up paying double the tax on the same amount of income. This is where taxpayers can benefit from the DTAA.

Advantages from DTAA

For taxpayers, the DTAA has a lot of advantages. The primary advantage is that the same income is not subject to two taxes. Apart from this,

withholding tax reduction (Tax Deduction at Source or TDS)
tax credit
Exempt from taxation
To reduce the possibility of tax evasion for taxpayers in either or both of the countries between which the bilateral or multilateral DTAA agreement has been struck, this is the main goal of DTAA agreements with other nations.
Less withholding tax is advantageous for taxpayers since they can pay lower TDS on their interest, royalties, or dividend incomes in India. Additionally, some agreements include tax credits in the source or nation of operations so that taxpayers don’t pay the same tax twice. Capital gains tax may be waived in some agreements, such as those with Egypt, Singapore, Mauritius, and Cyprus, which can be advantageous for taxpayers who can use the DTAA to reduce their taxes.

Withholding Tax Rates as per DTAA

The rates and rules of the DTAA vary by country, depending on the specific agreement signed by both parties. TDS rates on interest earned are either 10% or 15% in most countries, with rates ranging from 7.50% to 15%. The following section contains a list of DTAA rates for specific countries.

Country List for Withholding Tax Rates as per Double Taxation Agreements

There are currently 85 countries that have DTAA agreements with India. The following countries have an agreement with India to avoid double taxation. Interest TDS rates are listed below. (In alphabetical order)

Sr. No.	Country	Tax Rates
1	Armenia	10%
2	Australia	15%
3	Austria	10%
4	Bangladesh	10%
5	Belarus	10%
6	Belgium	15%
7	Botswana	10%
8	Brazil	15%
9	Bulgaria	15%
10	Canada	15%
11	China	15%
12	Cyprus	10%
13	Czech Republic	10%
14	Denmark	15%
15	Egypt	10%
16	Estonia	10%
17	Ethiopia	10%
18	Finland	10%
19	France	10%
20	Georgia	10%
21	Germany	10%
22	Greece	As per agreement
23	Hashemite Kingdom of Jordan	10%
24	Hungary	10%
25	Iceland	10%
26	Indonesia	10%
27	Ireland	10%
28	Israel	10%
29	Italy	15%
30	Japan	10%
31	Kazakhstan	10%
32	Kenya	15%
33	South Korea	15%
34	Kuwait	10%
35	Kyrgyz Republic	10%
36	Libya	As per agreement
37	Lithuania	10%
38	Luxembourg	10%
39	Malaysia	10%
40	Malta	10%
41	Mauritius	7.50-10%
42	Mongolia	15%
43	Montenegro	10%
44	Morocco	10%
45	Mozambique	10%
46	Myanmar	10%
47	Namibia	10%
48	Nepal	15%
49	Netherlands	10%
50	New Zealand	10%
51	Norway	15%
52	Oman	10%
53	Philippines	15%
54	Poland	15%
55	Portuguese Republic	10%
56	Qatar	10%
57	Romania	15%
58	Russia	10%
59	Saudi Arabia	10%
60	Serbia	10%
61	Singapore	15%
62	Slovenia	10%
63	South Africa	10%
64	Spain	15%
65	Sri Lanka	10%
66	Sudan	10%
67	Sweden	10%
68	Swiss Confederation	10%
69	Syrian Arab Republic	7.50%
70	Tajikistan	10%
71	Tanzania	12.50%
72	Thailand	25%
73	Trinidad and Tobago	10%
74	Turkey	15%
75	Turkmenistan	10%
76	UAE	12.50%
77	UAR (Egypt)	10%
78	Uganda	10%
79	UK	15%
80	Ukraine	10%
81	United Mexican States	10%
82	USA	15%
83	Uzbekistan	15%
84	Vietnam	10%
85	Zambia	10%

DTAA is an effective financial agreement that is beneficial to both the taxpayer as well as the respective tax collection authorities in various countries.

Frequently Asked Questions: -

What is rate of tax as per DTAA?

15% if at least 10% of the shares of the company paying the dividend is held by the recipient; 20% in other cases. 20% 10% if interest is received by a financial institution or insurance company; 15% in other cases.

What is DTAA dividend rate?

In India, a company which has declared, distributed or paid any amount as a dividend, is required to pay a dividend distribution tax at 15%.

What is DTAA double taxation avoidance?

DTAA or Double Taxation Avoidance Agreement is an agreement that India signed with 85 other countries to avoid levying taxes twice on the same income. This provision helps taxpayers accumulate income savings by paying the tax in only one country. DTAAs can be comprehensive in many countries.

Disclaimer: The main goal of this article is to “assist investors in making informed financial decisions.” The above information is provided only for educational purposes. Readers are advised to exercise caution and seek professional counsel before relying on the above information. K M Gatecha & CO LLP is not liable for any loss or harm incurred by readers who take action based on the information provided in this article. “Please keep in mind that the opinions expressed in this Blog/Comments Section/Forum are clarifications intended for the readers’ reference and guidance as they investigate further on the topics/questions raised and make informed decisions. These are not intended to be investment advice or legal advice.”