Page |1

RESEARCH PROJECT
ON
DOUBLE TAXATION

SUBMITTED BY
SHUBHAM PAL
ROLL NO-164140064
B.COM. LL.B (Hons.)
7TH SEMESTER

OF

FACULTY OF LAW
DR. SHAKUNTALA MISRA NATIONAL REHABILITATION
UNIVERSITY, LUCKNOW

IN
10/2019
UNDER THE GUIDANCE OF

SUSHMITA MA’AM
 Page |2

ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher SUSHMITA

MA’AM who gave me the golden opportunity to do this wonderful topic
“DOUBLE TAXATION” which also helped me in doing a lot of Research and I
came to know about so m any new things I am really thankful to them.

SHUBHAM PAL
 Page |3

TABLE OF CONTENTS

ACKNOWLEDGEMENT................................................................................................................ 2

INTRODUCTION............................................................................................................................. 4

DOUBLE TAXATION AVOIDANCE AGREEMENT............................................................... 5

OJECTIVE OR NEED OF DTAA.................................................................................................. 6

METHOD OF ELIMINATING DOUBLE TAXATION............................................................. 7

CONCLUSION.................................................................................................................................. 8

BIBLIOGRAPHY............................................................................................................................. 9
 Page |4

INTRODUCTION

Double taxation can be defined as the levy of taxes on income

or capital in the hands of the same tax payer in more than one country, in respect of
the same income or capital for the same period. Double taxation is the imposition of
two or more taxes on the same income (in the case of income taxes), asset (in the
case of capital taxes), or financial transaction (in the case of sales taxes). It refers to
taxation by two or more countries of the same income, asset or transaction, for
example income paid by an entity of one country to a resident of a different country.
The double liability is often mitigated by tax treaties between countries. For e.g. An
NRI will have to pay tax on the income earned in India on source basis i.e. where
income accrues or arises. On the same income, tax will have to be paid in the
country of residence on residence basis. As such, an NRI will end up paying
Income-tax twice on the same income. Tax Treaties provide protection to tax payers
against such double taxation.

Double Taxation in India

Double taxation occurs when an individual is required to pay two or more taxes
for the same income, asset, or financial transaction in different countries. Double
taxation occurs mainly due to overlapping tax laws and regulations of the countries
where an individual operates his business. Double taxation Agreement is the
systematic imposition of two or more taxes on the same income. The double
liability is often mitigated by tax agreements, known as treaties, between countries.

When an Indian businessman makes a profit or some other

type of taxable gain in another country, he may be in a situation where he will be
required to pay a tax on that income in India, as well as in the country in which the
income was made! To protect Indian tax payers from this unfair practice, the
Indian government has entered into tax treaties, known as Double Taxation
Avoidance Agreement (DTAA) with 65 countries, including U.S.A, Canada, U.K,
 Page |5

Japan, Germany, Australia, Singapore, U.A.E, and Switzerland. DTAA ensures

that India's trade and services with other countries; as well the movement of capital
is not adversely affected.

Double Taxation Avoidance Agreement

The Double Tax Avoidance Agreement (DTAA) is a tax treaty signed between
two or more countries to help taxpayers avoid paying double taxes on the same
income. A DTAA becomes applicable in cases where an individual is a resident of
one nation, but earns income in another.

DTAAs can be either be comprehensive, encapsulating all

income sources, or limited to certain areas, which means taxing of income from
shipping, inheritance, air transport, etc. India presently has DTAA with 80+
countries, with plans to sign such treaties with more countries in the years to come.
Some of the countries with which it has comprehensive agreements include
Australia, Canada, the United Arab Emirates, Germany, Mauritius, Singapore, the
United Kingdom and the United States of America.

Advantages of Double Taxation Avoidance Agreement

The intent behind a Double Tax Avoidance Agreement is to make a country appear
as an attractive investment destination by providing relief on dual taxation. This
form of relief is provided by exempting income earned in a foreign country from
tax in the resident nation or offering credit to the extent taxes have been paid
abroad.

Say, for instance, if an individual is asked to go abroad on deputation and receives

payments during the period away from home, the income earned may be subject to
tax in both the countries. The individual can claim relief at the time of filing tax
return for that financial year, provided there is an applicable DTAA. If the person
is an NRI with investments in India, there may be DTAA provisions that apply to
income from such investments. In some cases, DTAAs also allow for concessional
rates of tax. For instance, interest earned on NRI bank deposits attract TDS of
 Page |6

30%. However, under the DTAAs that India has signed with other countries, tax is
deducted at 10-15%.

OBJECTIVES OR NEED OF DTAA

(1) Protection against double taxation: These Tax Treaties serve the purpose
of providing protection to tax-payers against double taxation and thus preventing
any discouragement which the double taxation may otherwise promote in the free
flow of international trade, international investment and international transfer of
technology;

(2) Prevention of discrimination at international context: These treaties aim

at preventing discrimination between the taxpayers in the international field and
providing a reasonable element of legal and fiscal certainty within a legal
framework;

(3) Mutual exchange of information: In addition, such treaties contain

provisions for mutual exchange of information and for reducing litigation by
providing for mutual assistance procedure; and

(4) Legal and fiscal certainty: They provide a reasonable element of legal and
fiscal certainty within a legal framework.
 Page |7

Methods of Eliminating Double Taxation 

The objective of double taxation can be achieved Tax treaties employ various
methods or a combination of 

(i) Exemption Method –

One method of avoiding double taxation is for the residence

country to altogether exclude foreign income from its tax base. The country of
source is then given exclusive right to tax such incomes. This is known as
complete exemption method and is sometimes followed in respect of profits
attributable to foreign permanent establishments or income from immovable
property. Indian tax treaties with Denmark, Norway and Sweden embody with
respect to certain incomes.

(ii) Credit Method

This method reflects the underline concept that the resident

remains liable in the country of residence on its global income, however as far the
quantum of tax liabilities is concerned credit for tax paid in the source country is
given by the residence country against its domestic tax as if the foreign tax were
paid to the country of residence itself.

Recent NEWS

India concludes Double Taxation protocol with Singapore

New Delhi, June 25, 2011(ANI): India has signed a protocol amending Double
Taxation Avoidance Agreement (DTAA) with Singapore for effective exchange of
information in tax matters. The protocol was signed by Central Board of Direct
Taxes (CBDT) Chairman Prakash Chandra, on behalf of the Indian Government,
and High Commissioner of Singapore to India Karen Anne Tan Ping Ming, on
behalf of the Singapore Government, on Friday.

The negotiations for entering into an amending protocol were completed in one
round at Singapore.
 Page |8

CONCLUSION

Tax treaty interpretation has significant consequences for the taxation of

transactions which cross international borders. Only a uniform interpretation
among states will ensure an efficient and equitable application of tax treaties,
which aim to eliminate double taxation and distribute tax revenues among
contracting states. This Article has presented some of the problems inherent in the
interpretation of tax treaties by different states, such as inconsistent interpretations
of identical terms or varying domestic treatment of partnerships and similar
entities. It has suggested an approach to a common interpretation, based on a
paradigm distributive rule, and has emphasized the important role played by the
OECD Model Treaty as a basis for understanding all other tax treaties. More
generally, the Article has explained the structure and functioning of the growing
network of international tax treaties and its relation to domestic taxation and
traditional international law principles. As tax treaty law becomes more widely
understood, and as tax treaties demonstrate growing uniformity of text and of
interpretation, the international movement of goods, capital, and persons will be
facilitated by a uniform and fair system of international taxation.
 Page |9

BIBLIOGRAPHY

1. https://www.indiantaxupdates.com/concept-of-double-taxation-relief-us-9090a91/
2. https://www.indiafilings.com/learn/double-taxation-relief/
3. https://business.mapsofindia.com/india-tax/double-taxation-india.html
4. https://blog.ipleaders.in/double-taxation-avoidance-agreement/