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India-Australia Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) signed between the Republic of India and Australia is a pivotal treaty designed to prevent double taxation of income and thwart fiscal evasion with respect to taxes on income. This significant agreement was formally ratified on December 30, 1991, and has since played a crucial role in fostering economic collaboration and preventing taxation conflicts between the two nations.

Applicability

The India-Australia DTAA is a bilateral treaty that addresses the concerns of individuals and companies who are residents of either India or Australia. It specifically covers the following taxes:

a. In Australia:

  • Income tax.
  • Resource rent tax, pertaining to offshore projects related to the exploration or exploitation of petroleum resources under the federal law of the Commonwealth of Australia.

b. In India:

  • Income tax, including any surcharge.
  • Surtax imposed on chargeable profits of companies.

Key Takeaways

Here are some crucial aspects to understand about the India-Australia DTAA:

  1. This DTAA supersedes a prior limited tax treaty signed by both countries in 1983.
  2. The DTAA encompasses various forms of income taxation, including corporate tax, personal income tax, and capital gains tax.
  3. It applies to residents of India and Australia who earn income in the other country or have assets located there.
  4. Under the DTAA, residents of both countries can claim a tax credit for taxes paid in one country against their tax liability in their home country.
  5. The DTAA also includes provisions for the exchange of information between the tax authorities of both countries to prevent tax evasion.
  6. Dispute resolution related to double taxation is facilitated through the mutual agreement procedure outlined in the DTAA.
  7. The agreement has been amended multiple times over the years, with the most recent amendment taking place in 2020.
  8. The withholding tax rates, as per the DTAA, are as follows:
    • Dividends: 15%, with dividends earned by government institutions being exempt.
    • Interests: 10%, and interests earned by government institutions are also exempt.
    • Royalties: 15%.
    • Fees for technical services: 15%.

Inference

The India-Australia DTAA plays a pivotal role in fostering cross-border trade and investment by eliminating the risk of double taxation. This, in turn, encourages individuals and businesses to engage in cross-border economic activities without the burden of dual tax liabilities.

The DTAA’s provision to allow taxpayers to claim tax credits for taxes paid in the other country against their home country’s tax liability ensures that taxpayers are not subject to unfair or excessive taxation. This agreement is applicable to both residents and non-residents of India and Australia, with the specific provisions varying depending on the taxpayer’s residential status and the type of income earned.

Chandrawat & Partners is well-versed in matters related to international tax agreements and can provide expert legal counsel on the India-Australia Double Taxation Avoidance Agreement and related issues. For detailed legal guidance or assistance on this matter, please feel free to contact us. We are committed to providing professional legal services and helping you navigate the complexities of international tax laws.

For more information or to seek our expertise on this agreement or other legal matters, please do not hesitate to reach out to us. We are here to serve your legal needs with the utmost professionalism and diligence.

To know more about DTAA relations between India and Australia, please download our Guide.

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