Tax Planning

DTAA Benefits: How to Avoid Double Taxation as an NRI

January 10, 2025

6 min read

Key Takeaway

Double Taxation Avoidance Agreements (DTAA) help NRIs avoid paying tax on the same income in both India and their country of residence, providing significant tax savings through proper planning and documentation.

What is DTAA?

Double Taxation Avoidance Agreement (DTAA) is a bilateral agreement between India and other countries to prevent the same income from being taxed in both jurisdictions. India has signed DTAAs with over 90 countries, making it easier for NRIs to optimize their tax obligations legally.

How DTAA Benefits NRIs

Tax Credit Method

Tax paid in one country can be claimed as credit against tax liability in the other country.

Exemption Method

Income taxed in one country is completely exempt from taxation in the other country.

Types of Income Covered

Salary Income: Employment income from either country
Business Income: Profits from business or profession
Capital Gains: Gains from sale of assets like property or securities
Dividend Income: Dividends received from companies
Interest Income: Interest from bank deposits, bonds, or loans
Rental Income: Income from property rentals
Royalty Income: Income from intellectual property

Popular DTAA Countries for NRIs

Americas

• United States
• Canada
• Brazil

Europe

• United Kingdom
• Germany
• France
• Netherlands

Asia-Pacific

• Singapore
• Australia
• UAE
• Japan

How to Claim DTAA Benefits

1

Obtain Tax Residency Certificate (TRC)

Get TRC from your country of residence's tax authorities.

2

Submit Form 10F

File Form 10F with Indian tax authorities to claim DTAA benefits.

3

Maintain Proper Documentation

Keep records of tax payments and relevant income documents.

Common Scenarios and Solutions

Case Study: NRI in the USA

Situation: Software engineer earning $120,000 in the US, also receiving ₹5 lakh rental income from Indian property.

Without DTAA: Pays tax on rental income in both India (~₹50,000) and US (~$2,000) = Total ₹2.15 lakh

With DTAA: Claims foreign tax credit in US for Indian tax paid = Saves approximately $2,000 (₹1.65 lakh)

Important Points to Remember

• DTAA benefits must be claimed proactively - they're not automatic
• TRC is typically valid for one financial year
• Different DTAA treaties have different provisions and rates
• Consult tax professionals for complex scenarios
• Maintain detailed records of all tax payments and claims