In the present era, India is accustomed to taking up works/jobs in abroad in regard to any offshore assignment or project. It simply states that the individual spends some part in India and some part of the career in abroad. The brain twisting barrier is the ambiguity on taxation. The individual tax liability greatly depends upon the residential status and source of income.

DTAA or Double Taxation Avoidance Agreement acts a saviour to the tax payers. According, to the treaty income will be taxable in either of the contracting states, depending upon the understanding of the nations, and the conditions in respect to taxations and exemption.

Till date India has signed double tax avoidance agreements (DTAAs) with 93 countries and limited agreements with 8 countries. The agreement also provides various reliefs:-

1. Exemption Method

Under the aforesaid method, either of the state has an exclusive right to tax the income arising in the source state. To understand the same the concept, here below is an illustration.

When an individual ‘A’ has an income from Dividend, royalty, interest and fees for technical services which are applicable in treaty with Greece. So, for a citizen of the country if the dividend, interest, royalty or fees for technical services is arising in India, then it will be solely taxable in India only and if for a resident if such income is arising in Greece then the income will solely be taxed in that country and it will not be at all taxable in India

2. Tax Credit Method

Under the said method, Foreign Tax Credit (FTC) is given in the resident state in respect of tax paid in the source state on the doubly taxed income.

Further, in India taxability greatly depends on the residential status and the source of income. To understand the same the concept, here below is an illustration.

Mr A (an Indian resident) has received salary from a US company for job in US. Since Mr A is a resident so his global Income will be taxable. In this case source country is US (since the service has been rendered in US) and resident country is India. So at the time of computation of tax liability of Mr A the tax paid in US will be allowed as set off against his total tax liability but limited to the tax payable on such foreign income at Indian tax rates.

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