The Central Government has signed with several countries, including the U.S. “Agreements for the Avoidance of Double Taxation”. By this, I am given to understand that in the case of an Indian who is a perm anent resident in the U.S. (green card holder) but who may have taxable income in India, as also in the U.S., double taxation is sought to be avoided as per the following. If his tax liability is A in the U.S. and B in India, calculated independently on the respective incomes, if B is less than A in rupee equivalent, no tax is payable in India. On the other hand, if B is more than A, the difference between B and A, that is, (B-A) alone is payable in India. Kindly clarify whether the above position remains the same, or whether it has undergone any change.The reader is incorrectly advised as to the method of relief under the Double Tax Avoidance Agreement.
Some items like capital gains on sale of immovable property is taxable under the Agreement only where the property is situated, so that the question of double tax relief does not arise at all.
Salary is taxed where employment is exercised, but the country where the employee is permanent resident will give credit for such tax paid in the place of service, if the same income is taxable.
If it is business income, it may be taxable in both countries, where business is located and where such business has permanent establishment, through which income is earned.
The country where business is located would give credit for tax paid on the doubly taxed income at the lesser of the two rates.
This is a broad pattern of Double Tax Avoidance Agreement with minor differences possible in some agreements.