India and Tajikistan have written the new chapter of their relations when both nations have inked on the Double Taxation Avoidance Agreement (DTAA). With an aim of bolstering the flow of technology, investment and services both India and Tajikistan have signed the DTAA. From the India, Mr. Narendra Bahadur Singh, chairman of the Central Board of Direct Taxes, signed the agreement whereas Mr. Norinov Jamshed Nurmahmadovich, deputy minister of finance of the Republic of Tajikistan was the signatory on the DTAA. Unveiling the key points, the official statement released says that for the India the agreement will include of income tax with any surcharge thereon and for the Tajikistan it will be taxes on income of legal persons and also covers the taxes on the individual’s income. According to the said Article, a resident will be called that person who under the purview of state law is liable to tax thereupon because of his domicile, residence, management place or due to some criterion of similar characteristics. The government release has asserted that “(In case of India) the Agreement will cover… income tax, including any surcharge thereon, and in case of Tajikistan, the taxes on income of legal persons and on income of individuals “. Further it added that the pensions and other similar type of remuneration arise will also be taxed only in the state of residence. In respect of such profit which is earned by the enterprise by involving in the shipping or aircraft operations in the international traffic, the agreement says that such profit shall be taxed only in the nation of the enterprise.
The DTAA agreement provides tax concessions to visiting students for the reasonable period of time or for that duration which is customarily required for completing the academics or for the 6 consecutive years, which shall be started from the date of their arrival. Situation of double taxation will be eliminated by the credit method which details that the tax paid by the Indian resident in the Tajikistan will be considered as the credit if the same income is getting taxable in both India and the vice versa. The anti-abuse provision is also incorporated for avoiding any type of the misusing of the DTAA. The DTAA treat offers the constitution of the permanent establishment of the project under the threshold time duration of more than 1 year. The double taxation avoidance agreement also provides of the constitution of the public enterprise, where the enterprise of the contracting state engages in the business in the other state with the help of the dependent agent.
Double Taxation
Double taxation is that situation which arises with the imposing of 2 or more taxes on the same income, assets or the financial transaction. Many times such situation arises in which business or the individual who is the resident of one nation earn the taxable gain in another. In such situation it becomes obligation due to the domestic law for the person to pay tax on gains in their country and also make payment in that nation in which it has been made. For avoidance of such type of situation, nations prefer to enter into the bilateral double taxation avoidance agreement with other countries.
