Are you an NRI paying taxes in two countries? Understand how the DTAA works and how you can save money on your Indian investments and income.
For Non-Resident Indians (NRIs), managing finances across borders can lead to the nightmare of double taxation—paying tax on the same income in India and in their country of residence. Fortunately, the Double Taxation Avoidance Agreement (DTAA) exists to prevent this.
How DTAA Works
India has signed DTAA treaties with over 80 countries. Under these agreements, NRIs can avoid paying taxes twice by claiming relief in one of two ways:
- Exemption Method: Income is taxed in only one country and completely exempt in the other.
- Tax Credit Method: Income is taxed in both countries, but the taxpayer can claim a credit in their residence country for the tax paid in the source country (India).
Applying DTAA on NRO Account Interest
Interest earned on an NRO account in India is typically subject to a flat TDS of 30%. However, if the NRI resides in a country with a favorable DTAA (like the US or UK), they can submit a Tax Residency Certificate (TRC) to the Indian bank to have the TDS rate reduced to 10% or 15%.
Navigating DTAA provisions requires specialized knowledge. Connect with the VAP & CO NRI desk to ensure you aren't leaving money on the table.
