CA Goutam Jain 

CA Goutam JainHow to claim benefit of relief under double taxation avoidance agreement by Non-Resident


How to avoid tax of same income in two Country i.e. Country of Resident of Person and Country of Source of Income–

In the era of greater connectivity across globe there is significant movement of manpower from one country to another and this lead to the arisen of tax issues of income earned in more than one country in single financial year.

Let say Mr. X citizen/resident of US comes India for short span employment or to provide contractual service? Will his income earned in India and US be taxable in india OR US?

Generally resident country i.e. country where person is citizen or resident, collect tax on his global income but what if he becomes resident of both US and India as per domestic tax law of US & India.

Domestic tax laws of respective country have clause of taxing income arisen from their country by non-resident / non citizen OR it may happen that person become resident of other Country on stays of certain period of time as per its domestic tax law and his income become taxable in that country too.

Section 9 of the Indian Income Tax Act tax income arises in India OR source of income is in India. Further if he stay in India for more than 182 days than he become resident of India and his entire, both of US & Indian income become taxable in India.

How to avoid this double taxation of same income in two different country?

In order to provide tax relief to avoid double taxation, various countries have entered into Double Taxation Avoidance Agreements (Tax Treaty).

Double Taxation Avoidance Agreements (Tax Treaty) deals with issues where person same income being tax in two or more country as per their domestic tax laws.

For that first Mr. X first will have to find out where he is Resident for paying tax as per Double Taxation Avoidance Agreements (Tax Treaty)?

Once he determined his residence country. Accordingly, Mr X would need to obtain a TRC from country of resident.

There may be a possibility that Mr. X becoming a resident in both the countries as per domestic law of respective country i.e. India & US. In such a situation a taxpayer may have to run through detailed tests provided in the Tax Treaty to break the tie of residency in favour of the other country.

Let say Mr X as per rules of Double Taxation Avoidance Agreements (Tax Treaty) becomes tax residence of US.

He will show this TRC to Indian tax authorities & either get income exempt from tax in India OR will get credit of tax paid in india from his US tax liability.

(Author is Partner of G Y & Company -B-101, Purav Heights, Mugbhat Lane , Girgoan , Mumbai-04 )

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0 responses to “Double Taxation Issue of Non Residents & relief under DTAA”

  1. Dushyant says:

    I am employee of India Company who has sent me to UK on deputation. I get salary in UK over which i pay Tax to UK govt.
    On my Gross income Tax (in UK) is deducted.
    On balance amount my employer further does deduction from my Net salary in UK a component named “India component”. This deduction is shown in India as my BASIC salary on India payroll.
    So salary which is already being taxed in UK, i am once again getting tax in India Govt as my company shows it as Basic salary (given to India employee based in UK).

    As I am working in UK and my salary is generated in UK so UK govt has right to charge me Tax on my earnings .. tax that i pay India is tax on tax. Pl. suggest as how can i get back tax which i have paid in India


  2. JOGESH says:

    Well written. Nice article. Very Very Good Mr. Goutam Jain.

  3. Santosh Patnaik says:

    Thanx for sharing the Article, it clearly explains the fundamental concept of DTAA for availing the relief….

  4. Goutam jain says:

    Mr devendra u may write on my mail id


    Dear sir,
    i am working in malesiya at working visa for 3 yrs.indian residant. what should i do to avoid DOUBLE TAXATION. WHAT DOCUMENT I SHOULD COLLECT FROM MALESIYA.

  6. Kamal Mehta says:

    Well written. Nice article.

  7. vswami says:


    The write-up ,as noted on the first blush, no doubt, has broadly set out the law applicable to an ‘individual’ to avoid /obviate ‘double taxation’ and claim relief as provided in the domestic law , rwt the applicable DTAA.

    In the context herein, it is worthwhile, nay imperative, to at least take a conscious note of and keep in focus the controversy that has come to surface,and allowed to remain to be set at rest until now, in the aftermath of a AAR Ruling, in case of a non-resident/foreign company. That is an instance in which the petitioner-company’s only income , admittedly of relevance for Indian Tax, was by way of capital gains; but, as held, not chargeable to Indian tax by virtue of the Treaty Override. Even so, the petitioner’s question in regard to compliance with the tax return filing requirement of section 139, has been ruled against the petitioner.

    The point in one’s mind is, unless and until that issue is finally resolved,and favorably as hoped for, the Ruling has the potential to remain, remotely or otherwise,sticking out as a sore thumb on the tax return filing requirement; to be precise,even if in a given case, the residential status of individual happens to be clearly that of a “not ordinarily resident” within the meaning of, as envisaged in,sub-section (6) of section 4 of the IT Act. For, in essence, the Ruling is that, if if a non-resident has no income other than tax exempt under the treaty, a claim that it is so exempt will require to be made by filing a tax return,with no option left.

    This is a matter seemingly worth a study,for practitioners in field practice in the area of individual’s taxation.

  8. Amit says:

    Well done.. please share your mail ID as i have some issues to discuss in this matter.

  9. sanjeev says:

    Its was very helpful for me to understand basics and please upload some more articles to enhance our basic understanding of concepts.

  10. Yogesh says:

    very well written. pls share your contact number.

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