- A DTAA is a tax treaty signed between two or more countries.
- Its key objective is that tax-payers in these countries can avoid being taxed twice for the same income.
- A DTAA applies in cases where a tax-payer resides in one country and earns income in another.
- DTAA with Singapore, Mauritius and Cyprus give full exemption on capital gains to investors as there’s no cap gains in contracting countries. These agreements were misused for round tripping black money.
- To curb revenue loss and check menace of black money through automatic exchange of information, India recently revised treaties with Mauritius and Cyprus and joint declaration was signed with Switzerland.
- The Section 90 of Income Tax (IT) Act, 1961 empowers Central Government to enter into agreement with foreign country or specified territory for avoidance of double taxation of income and for exchange of information for prevention of evasion or avoidance of income-tax chargeable under IT Act, 1961.