Do You Need DTAA & Foreign Tax Credit Advisory? A Practical Starting Point
India has signed Double Tax Avoidance Agreements (DTAAs) with more than 95 countries — treaties that determine which country gets to tax a given stream of cross-border income, and at what rate, when a person or company has ties to both jurisdictions. For an Indian resident earning income abroad, or a non-resident earning income in India, the DTAA is frequently the difference between paying tax twice on the same income and paying it once at a materially lower rate. At PNPC Global, we advise businesses, NRIs, and foreign investors on treaty eligibility, Foreign Tax Credit (FTC) claims under Rule 128, Tax Residency Certificate (TRC) and Form 10F compliance, Permanent Establishment (PE) exposure, and the practical mechanics of claiming treaty relief in an Indian tax return.
Understanding the Service
A Double Tax Avoidance Agreement is a bilateral treaty between India and another country that allocates taxing rights over specific categories of cross-border income — business profits, dividends, interest, royalties, fees for technical services, capital gains, salary, and independent personal services — between the country of residence and the country of source. Most Indian DTAAs are modelled substantially on the OECD Model Tax Convention or the UN Model, with country-specific variations negotiated bilaterally. Section 90 of the Income Tax Act empowers the Central Government to enter into these agreements, and Section 90(2) provides the operative rule that matters most in practice: where a DTAA applies, the taxpayer may be governed either by the provisions of the Income Tax Act or by the provisions of the DTAA, whichever is more beneficial to the taxpayer. Section and rule references in this article (Sections 6, 90, 90A, 91 and 195, Rules 37BB and 128) are to the Income-tax Act 1961 and its Rules, which govern income up to FY 2025-26; from tax year 2026-27 the Income-tax Act 2025 applies with renumbered sections, rules and forms, so confirm the current equivalent before relying on a reference.
For the full scope, current process and what PNPC includes, see the dedicated DTAA & Foreign Tax Credit Advisory service page.
Is This Relevant to Your Business?
- You are an Indian resident earning income abroad — salary, consulting fees, rental income, dividends, capital gains, or business profits — and that income has already suffered tax in the source country
- You are a non-resident (individual, company, or fund) earning India-source income — royalties, fees for technical services, interest, dividends, capital gains on Indian securities, or business profits through operations in India
- Your Indian business makes payments to a foreign counterparty — software licence fees, technical service fees, interest on foreign loans, professional fees — and needs to determine the correct TDS rate under Section 195 read with the applicable treaty
- You are an NRI or foreign national who has become a tax resident of India under the amended Section 6 rules (including deemed residency or the 120-day test that applies to visitors whose Indian income exceeds the specified threshold) and need to understand overlapping tax exposure
Before You Assume You Need This
- Your income is entirely domestic — earned and received within India with no foreign element — in which case standard income tax return filing and TDS compliance advisory (not DTAA analysis) is the relevant service
- You are making a single small remittance to a non-resident that clearly falls within a Rule 37BB exempt category — a straightforward Form 15CA/15CB engagement without deep treaty analysis may be sufficient rather than a full DTAA advisory mandate
- You are a purely domestic resident planning an outbound investment for the first time with no immediate cross-border income yet — FEMA/ODI structuring advisory may be the more immediate need, with DTAA planning layered in once the structure and income flows are decided
Common Questions
What exactly is a DTAA, in plain terms?
It is a bilateral agreement between India and another country that decides which of the two countries gets to tax a specific type of cross-border income, and often at what maximum rate. Without a DTAA, the same income — say, consulting fees earned by an Indian resident from a UK client — could in principle be taxed fully in both India (on a residence basis) and the UK (on a source basis). The DTAA either allocates the taxing right to one country, caps the source country's rate, or requires the residence country to give credit for tax paid in the source country, so the taxpayer is not taxed twice on the same rupee of income.
Does India have a DTAA with every country?
No. India has DTAAs with more than 95 countries, but not with every jurisdiction. Where no DTAA exists, Section 91 of the Income Tax Act provides unilateral relief — an Indian resident who has paid tax in a non-treaty country on foreign income can still claim a credit for that foreign tax against Indian tax on the same income, subject to conditions broadly similar in spirit to treaty-based FTC, though the mechanics and documentation requirements differ from Section 90/90A treaty relief.
I am an Indian resident who paid tax abroad on foreign income. Can I get that tax back from India?
Not as a refund from India — but you can claim a Foreign Tax Credit (FTC) that reduces your Indian tax liability on that same income, under Section 90/90A (where a DTAA exists) or Section 91 (where it does not), computed as prescribed under Rule 128. The credit is capped at the lower of the actual foreign tax paid and the Indian tax attributable to that specific income — you cannot use excess foreign tax paid on one income stream to offset Indian tax on unrelated income, and any foreign tax in excess of the Indian tax on that income is not refunded or carried forward (with a narrow exception for credit relating to foreign tax disputes resolved in a later year).
Getting This Right From the Start
Speak with a PNPC Chartered Accountant before you assume a DTAA benefit applies. Treaty text, not general awareness of India's treaty network, decides your actual tax outcome — and we read the treaty for you, across India and the UAE, before you file or remit.
PNPC Global has advised Chennai, Bangalore and Hyderabad businesses since 1986. Explore the full Income Tax practice for related services, or go straight to the DTAA & Foreign Tax Credit Advisory page for specifics.
This is a general explainer, not a substitute for checking today's rules with PNPC or the relevant authority — figures and deadlines move, so none are quoted here as fixed.