DTAA or Double Taxation Avoidance Agreement is a tax agreement signed between India and other countries so that taxpayers can avoid paying double taxes on their income earned from the source country as well as the residence country. At present, India has double tax avoidance treaties with more than 80 nations around the world.
Main purpose of DTAA between two countries is avoidance of double taxation, on income earned in any of these countries.Generally under such agreements credit is allowed and taxed by the country in which the taxpayer resides, for taxes levied in the other treaty country.due to the result the taxpayer pays no more than the higher of the two tax rates.
Comprehensive DTAAs are those which cover almost all types of incomes covered by any model convention. Many a time a treaty covers wealth tax, gift tax, surtax etc. too.
Limited DTAAs are those which are limited to certain types of incomes only, e.g. DTAA between India and Pakistan is limited to shipping and aircraft profits only.