Double Taxation Essay

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AN INSIGHT INTO DOUBLE TAXATION AVOIDANCE AGREEMENTS Introduction Every country seeks to tax the income generated within its territory on the basis of aspects like residence of taxable entity, source of income, Permanent Establishment and so on and so forth. Double taxation may be delineated as the imposition of taxes on income or capital in more than one country on the same tax payer, relating to the same income or capital for the same tax year. Double taxation may arise when an individual or an entity has connections with more than one country. Such double taxation is one of the major impediments to the development of inter-country economic relations. Double tax Avoidance Agreements comprise of consensus between two countries aiming at elimination of double taxation. Double Taxation Avoidance Agreements between two countries would focus on mitigating the incidence of double taxation. It would promote exchange of goods, persons, services and investment of capital among such countries. These are bilateral economic agreements wherein the countries concerned assess the sacrifices and advantages which the treaty brings for each contracting nation. An attempt has been made, in this article, to analyze and provide a brief account of the various insights in respect of double taxation avoidance agreements. What is DTAA? An individual who earned income has to pay income tax in the country in which the income was earned and also in the country in which such person was resident. As such, the liability to tax on the aforesaid income does arise in the country of source and the country of residence. In order to avoid the hardship of double taxation, Government of India has entered into Double Taxation Avoidance Agreements with several countries. DTAAs taken care of technical know-how and service fees reduced rates of tax on dividend, interest and royalties

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