TAX PROVISIONS FOR EXPATRIATE INDIANS

The tax liability related to expatriates working outside the India would be determined based on their residential status. The following are the main categories of Non-Resident Indians as per Income Tax Act, 1961
1) Non-Resident Indian (NRI)
a) He/She is not in India for 182 days or more during the relevant previous year
b) He/She india for 60 days or more during the previous year and he/she is not in India for 365 days or more during the 4 years prior to the previous year
c) In the case of an individual on visit to India or a member of the crew of an Indian ship or a person leaving India for employment outside India, the requirement of stay in India of 60 days in condition 2 above is extended to 182 days.

2) Resident but not Ordinarily Resident (RNOR)

A NRI who has returned to India for good is covered under the provisions of section 6(6) of the Income-tax Act. He is given a special status of RESIDENT BUT NOT ORDINARILY RESIDENT (RNOR) if he satisfies one of the following conditions:
a) He is not a resident, as per the above provisions, for at least 9 out of 10 previous years prior to the previous year under consideration.
b) His stay in India during the 7 previous year prior to the previous year under consideration should not be 730 days or more

Tax Liabilities Thus according to condition in clause (a) a new comer to India would remain ‘not ordinarily resident’ in India for the first 9 years of his stay in India. Similarly, in case where a person who is resident in India goes abroad and ceases to be a resident in India for atleast 2 years, he shall, on his return, be treated as not ordinarily resident for the next 9 years. ies of each category of Individuals

Based on the residential status of payer, his/her tax liability will be as follows:-

a) Resident - All income of the previous year wherever accruing or arising or received by him including incomes deemed to have accrued or arisen.
b) Non-Resident Indian - All income accruing, arising to or deemed to have accrued or arisen or received in India.
c) Resident but not Ordinary Resident - All Income accruing or arising or deemed to have accrued or arisen or received in India. Moreover, all income earned outside India will also be included if the same is derived from a business or profession controlled or set up in India.

3) Special Provisions Relating to Non-Residents
Chapter XIIA of the Income Tax Act deals with special provisions relating to certain incomes of non-residents. Sec. 11 5D deals with special provisions regarding computation of investment income of NRIs. Section 11 5E relates to investments income and long term capital gains of NRIs, such income being taxed at concessional flat rates. As per section 11 5F, capital gain is not chargeable on transfer of foreign exchange assets under certain circumstances. The NRIs need not file their return of income if their total income consist only of investment income or long term capital gains or both and proper tax has been deducted from this income(Sec. 11 5G). Benefits under this chapter are available even after the assessee becomes a resident (Sec. 11 5H). The provisions of this chapter would not apply if the assessee so chooses (Sec. 115I).

4) DTAA -Double Taxation Avoidance Agreement
The Central Government acting under the authority of Law(Sec. 90) has entered into DTAAs with more than 80 countries. Such treaties serve the purpose of providing protection to the tax payers from double taxation. As per section 90(2), in relation to an assessee to whom any DTAA applies, the provisions of the Act shall apply only to the extent they are more beneficial to the assessee. The provisions of these DTAAs thus prevail over the statutory provisions. For availing the benefits under DTAA the NRIs need to complete certain formalities for example for getting the reduced rate of tax deduction from bank interest (NRO deposits), they need to submit certain declaration with their banks before the starting of the each financial year.

To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities of the country of his residence. These documents should be submitted to the designated bank branch at the time of opening the bank account or subsequently. New TDS rate shall be applied only after the acceptance of the Residency Certificate by the designated banker.

5) Indian Residents posted abroad for employment
Indian residents who have taken up employment in countries with which India has got DTAA are entitled to the benefit of the DTAA entered into by India with the country of employment. Accordingly, their tax liability is decided. Indian expatriates working abroad have been granted several special tax concessions under the Act. Professors, teachers and research workers working abroad in any university or any educational institutions are entitled to deduction of 75% of their foreign remuneration provided the same is brought into India in convertible foreign exchange within a period of 6 months from the end of the previous year or such extended time as may be allowed(Sec. 80-R). Similarly, in case of an Indian Citizen having received remuneration for services rendered outside India, 75% of his foreign remuneration is deductible from his taxable income provided such remuneration is brought to India in convertible foreign exchange within the time specified above (Sec. 80 RRA). From assessment year 2001-2002 onwards, there has been a change in the amount of deduction available under sections 80R/ 80RRA. For details, reference may be made to the sections concerned of the Income Tax Act. No deduction u/s 80R/80RRA shall be allowed in respect of A.Y. 2005-06 onwards. It may also be mentioned here that as per section 9(1)(iii) income chargeable under the head ‘Salary’ payable by the Government to a citizen of India for services rendered outside India is deemed to accrue or arise in India. However, allowances or perquisites paid or allowed outside India by the Govt. to a citizen of India for rendering services abroad is exempt from taxation u/s 10(7).

6) Income Tax Clearance Certificate
A resident Indian proceeding overseas for employment has to apply for an Income Tax Clearance Certificate on Form 31, as per Section 230 (I) of the Income Tax Act 1961. The Assessing Officer assessing the applicant’s form would provide Form 32 which authorises the application.. An expatriate before leaving the territory of India is required to obtain a tax clearance certificate from a competent authority stating that he does not have any outstanding tax liability. Such a certificate is necessary in case the continuous presence in India exceeds 120 days. An application is to be made in a prescribed form to the Income Tax Authority having jurisdiction for assessment of the expatriate to grant a tax clearance certificate. This is to be exchanged for final tax clearance certificate from the foreign section of the Income Tax Department. Tax Clearance certificate is valid for a period of 1 month from the date of issue and is necessary to get a confirmed booking from an airline or travel agency and may be required to be produced before the customs authorities at the airport
The following categories of persons are required to produce a tax clearance certificate from the concerned assessing officer prior to their departure:-
•persons who are not domiciled in India, and in whose case the stay in India has exceeded 120 days;
•persons of Indian or non-Indian domicile whose names have been communicated to the airlines/shipping Companies by the Income Tax authorities;
•persons who are domiciled in India at the time of their departure; but
i.intend to leave India as emigrants; or
ii.intend to proceed to another country on a work permit with the object of taking any employment or other occupation in that country; or
iii.in respect of whom circumstances exist, which in the opinion of the income tax authorities render it necessary for him to obtain the Tax Clearance Certificate.
7) Foreigners working in India can get one-time tax clearance: There are many foreign employees not domiciled in India. To save them the hassles of obtaining a tax clearance each and every time such employees travel abroad, there is a provision where they can get a onetime clearance certificate that covers a period of up-to five years. This type of one-time clearance is given in those cases where their employers give a guarantee in the prescribed form that if any tax is found due against the employee during the entire period of the contract of service plus two years the same shall be paid by the employer. Such a guarantee may also cover the tax liabilities of the spouse and dependents of the foreign employee.

8) Tax Exemption Certificate - Lower or Nil Rate of TDS:

The rate prescribed for TDS from NRI's income is the maximum rate of tax at which relevant Income is taxable in India. However, in majority of the cases of NRI, the actual tax liability is lower than this. However, the higher deduction of tax so made is generally not claimed as refund by filing Income Tax Returns In order to assist such a situation, the Income-tax Act has provided procedure under section 197 whereby a NRI can apply to the Assessing officer (in prescribed form) to issue specific certificate authorising the payer of income (who normally deducts tax at highest prescribed rate) to deduct tax at a lower rate or nil rate as the case may be. The NRI should estimate his income, tax liability and likely TDS and then apply for partial or complete Tax Exemption Certificate. The payer shall deduct tax in accordance with the certificate of the Assessing officer. Such a certificate would be binding on the payer.

Any NRI who has obtained Exemption Certificate needs to submit it to the Payer of the income who will follow the certificate and not deduct tax or may deduct at a lower rate as given.

IRFC Tax Free Bonds

Fund raising through tax free bonds gained momentum as the Indian Railway Finance Corporation (IRFC) and HUDCO announced their plans to raise an aggregate of Rs 10,985 crore by way of tax free bonds and in all likelihood they are set to be fully subscribed.

NHAI had earlier come out with its tax-free bond to raise up to Rs 10,000 crore and was successfully subscribed. Sources close to the development say that the NHAI bond was oversubscribed 2.5 times i.e. subscribed for Rs 25,000 crore.

Non Resident Indians are also eligible to invest in these bonds on repatriation as well as non-repatriation basis. In my opinion this tax-free interest bonds provide an excellent investment opportunity as the coupon offered under both the series is quite attractive. Moreover, highest rating of AAA from CRISIL and ICRA, makes it a safe investment avenue. Since this is a long term investment for 10-15 years, you are guaranteed to get assured/fixed tax free return for the entire periods even if your tax status has been changed from non-resident to resident. It is true that NRE Term Deposits now a day’s offer tax free interest rates in the range of 8-9.50%, but once your tax status changed to resident, you will be liable to pay tax on the income generated from this NRE deposit. So it is highly recommended all NRIs should subscribe for this tax free bond. Those NRIs who have PIS account can apply these bonds online. For more details, please keep in touch with your share broker. Interest rates are at peak level; best time to invest in fixed income tax free instruments. Interest rate cycle has peaked out . Given the sharp slowdown in the industrial activity and softening of the food inflation, the interest rate cycle has peaked out. Reserve Bank of India has restrained from increasing the interest rates in the last policy review meet and is expected to begin reducing rates in March or April 2012. The bond yields which have increased close to 9% levels have corrected significantly and show easing of pressure on rates. Indian Railway Finance Corporation Ltd•Issue period: 27 January 2012 to 10 February 2012.•Issue of Tax Free Secured Redeemable Non Convertible Bonds•Basis of allotment: On a first-come-first-serve basis within each category•The income by way of interest on these Bonds is fully exempt from Income Tax and shall not form part of Total Income as per provisions under section 10 (15) (iv) (h) of IT Act, 1961.•There will be no deduction of tax at source from the interest, which accrues to the bondholders on these bonds irrespective of the amount of the interest or the status of the investors.•Wealth Tax is not levied on investment in Bonds under section 2 (ea) of the Wealth -tax Act, 1957.Investment Opportunity:High post tax yield for triple A rated product
Tax free bond with yield of 8% – 8.30% is comparable with yields offered on government bonds and offer extremely attractive pre-tax yield close to 12% for a long period of time. The bond issue has got AAA (stable) rating from the rating agencies – Crisil, ICRA and CARE. The bonds would also be listed and tradable on NSE/BSE.Company Overview:•Financing arm of the Indian Railways•Notified as a Public Financial Institution under Section 4A of the Companies Act, 1956•Registered as a NBFC-ND-IFC (Infrastructure Finance Company) with Reserve Bank of India•100% shareholding held by Government of India•Consistently profit making Public Sector UndertakingTerms of the Issue:Particulars Issue details
Face Value per Bond Rs 1,000
Tenor 10 years 15 years
Minimum Application Rs 10,000 (in multiples of Rs 5,000 thereafter) Rs 10,000 (in multiples of Rs 5,000 thereafter)
Interest Rate % p.a. (Category I & II) 8 8.10
Interest Rate % p.a. (Category III) 8.15 8.30
Frequency of Interest payment Annual Annual
Issuance Demat form or physical form Demat form or physical form
Interest on application % p.a. 8.00
Interest on refund % p.a 4.00


Issue Structure:
Category I Category II Category III
Upto 45% of Overall Issue Size* Upto 25% of Overall Issue Size* Upto 30% of Overall Issue Size*
QIB & Corporate Individuals & HUF applying for more than Rs. 5 Lakhs Individuals & HUF applying for upto Rs. 5 Lakhs
*on first come first serve basis to be determined on the basis of date of receipt of applications duly acknowledged by the Bankers to the Issue.

Important FAQ·

Is there a lock-in period for these bonds?

No, these bonds do not have any lock-in period. The bonds would be traded onto recognised stock exchange and thus can be purchased and sold at the prevailing market prices on the exchange. If one wishes to hold until maturity, then the redemption would be made by the issuer. ·

Is interest on these bonds Tax Free?

Yes, the interest which one will earn would be exempt from tax. · Will TDS be deducted from the interest payment?

These bonds are tax free and hence not subject to TDS. ·
Is demat account mandatory to invest in tax free bonds?

The bonds can be held either in demat or physical form. But if one wish to trade onto the exchange, then it can happen only via demat mode. · Are investments in these bonds eligible for deduction u/s 80C?

The sum invested in these bonds is not eligible for any deduction under section 80C, 80CCF or 54EC. Hence, no deduction benefit is avail while one invests money into these bonds. However, as mentioned earlier the interest which you enjoy will be fully exempt from tax, and therefore no TDS will apply as well. However, capital gains on these bonds are taxable like normal corporate bonds.

Thus, if the bonds are sold within one year of the date of purchase, the short-term capital gains arising would be subject to tax at slab rates. Similarly, if the capital gains are made after a holding period of one year, long term capital gains will be applicable at 20% with indexation benefit or 10% without any indexation benefit. · Can a minor apply to these bonds?

Yes, a minor can apply for these bonds, but only and only through a guardian. ·

Can one apply in joint names?

Yes, one may apply in a joint name. However, the demat account will also be required to be held in joint name and the order of applicant shall be the same as appearing in the demat account. Moreover, all payments will be made out in favour of the first applicant as well as all communications will be addressed to the first named applicant whose name appears in the application form and at the address mentioned therein. · Who will get the interest in case of joint application?

In case of joint application, interest will be accounted to the first holder only.
My demat account is in joint name, but I want to apply is a single name?

In case of a single application, demat account of the same single applicant would be necessary. Joint demat account would not do. · If I’m an NRI can I invest in these bonds?

Yes, NRIs are eligible to invest in these bonds.

Whether an applicant applying in the first day of opening of the issue is assured of allotment? The issue will remain open for at least 3 days. If the issue is over-subscribed within this period, the applicants will receive allotment on pro rata basis. Thus investors who have applied during this period will receive at least some allotment. If issue extends beyond 3 days, the applicant in first 3 days will receive full allotment.

In whose favour the cheque is to be made?

Cheques/Drafts have to be made in the favour of

“IRFC Tax Free Bonds – Escrow Account – Tranche I" - for Non NRI’s

“IRFC Tax Free Bonds – NRI Escrow Account – Tranche I" - for NRI’s

“IRFC Tax Free Bonds – FII Escrow Account – Tranche I" - for FII’s * The coupon rates of 8.15% p.a. and 8.30% p.a. shall be payable only to the original allottees under Category III for the Tranche 1 and Series I Bonds and Tranche 1 and Series II Bonds respectively and shall not be payable to the transferees in case the Bonds are transferred or sold by the original allottees Please refer to the final prospectus for details.

In my opinion these tax-free interest bonds provide an excellent investment opportunity as the coupon offered under both the series is quite attractive. Moreover, highest rating of AAA from CRISIL and ICRA, makes it a safe investment avenue. Also the listing and trading of the bond (on BSE and NSE), facilitates a liquidity window to investors as one can exit even before the maturity / redemption date of these bonds, but as said earlier one need to hold these bonds in a demat mode. IRFC has smartly introduced the step-down feature which states that any buyer in the secondary market will only get non-retail (HNI and QIP) investor rate. The step-down feature is obviously to encourage serious investors to subscribe for the issue instead of trying to make a quick buck by swiftly selling it in the secondary market.Note: This is just for the general information of the readers; please refer the final prospects or take advice from your financial planner before investing http://irfc.nic.in/index1.asp?lang=1&linkid=64&lid=200

Free mobile calling application freephoo introduced in India

freephoo application will enable users to make free calls from their iPhone, iPod touch, iPad and Android-based phones using the WiFi or 3G network

Sweden-based freephoo has launched its mobile VoIP (Voice over Internet protocol) application in India.
The application will enable users to make free calls from their iPhone, iPod touch, iPad and Android-based phones using the WiFi or 3G network. On downloading freephoo, consumers can use their mobile number and phonebook to make free calls to other freephoo users.

"freephoo allows its user to make calls to people not having freephoo through its premium services with which user can make low priced calls to both fixed and mobile phones," freephoo spokesperson explained.

Spokesperson added that freephoo is currently available for Apple and Android users, but the company is looking at expand its services to other mobile phones as well.

Tax Free Bond form HUDCO (Housing and Urban Development Corporation Ltd

Those who missed the chance to get allotment in earlier tax free bond issues (NHAI, PFC) can apply for the forthcoming tax free bond to be issued by HUDCO. This is an advance intimation, which will enable you to prepare in advance to subscribe for this bond. Interest rates for the bonds are yet to be announced. I assume, the interest rates will be at par with the earlier tax free bonds.

Housing and Urban Development Corporation Limited (HUDCO) was established in 1970 as a wholly owned Government company with the objective to provide long term finance and undertake housing and urban infrastructure development programmers. HUDCO’s sustained performance and profitability earned them Mini-Ratna status conferred in FY 05. HUDCO had sanctioned loans of Rs.. 37,464 cr for housing and Rs. 84,906 cr for urban infrastructure on a cumulative basis up to Dec 2011.The Company has filed Draft Shelf Prospectus with SEBI on 11th January 201 and Issue of Tax Free Bonds expected to be launched by the end January 2012.Salient features of the proposed bond issue

1. The Bonds are issued in the form of tax-free, secured, redeemable, non-convertible Debentures and the interest on the Bonds will not form part of the total income.2. In case of over-subscription; allotment shall be on first cum first serve basis up to the date falling 1 day prior to the date of oversubscription and on proportionate basis on the date of oversubscription, in the manner specified in the Tranche Prospectus.3. CARE has assigned a rating of ‘CARE AA+’ to the Bonds. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Fitch has assigned a rating of ‘Fitch AA+ (ind)’ to the Bonds.4. The bonds are secured by way of floating first pari passu chargeon the present and future receivables of the company to the extent of amount mobilized under the issue. The security cover will be atleast 100% of the outstanding Bonds at any point in time.5. HUDCO shall pay [xx to be announced] % p.a. for Tranche 1 Bonds as interest on the Application amount retained. HUDCO shall also pay [xx to be announced ]% p.a. on refund of application amount. Such interest shall be paid along with the monies liable to be refunded.6. Bonds will be issued in Dematerialised form or physical form as specified by an Applicant in the Application Form. The bonds will be listed on NSE and BSE both and will be available in Demat form facilitating trading of these bonds.7. Investors can pledge or hypothecate these bonds to avail loans.

Tax Benefits1. The income by way of interest on these Bonds shall not form part of total income as per provisions under section 10 (15) (iv) (h) of I.T. Act, 1961;2. There shall be no deduction of tax at source from the interest, which accrues to the bondholders;3. As per provisions under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed Bond is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed securities are subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of acquisition or 10% of capital gains without indexation of the cost of acquisition;

4. Wealth Taxis not levied on investment in Bond under section 2(ea) of the Wealth-tax Act, 1957

Top 10 Home Buying tips

Top 10 Home Buying tips


1. Don’t buy home for short duration stay

If you are planning to buy a home for short duration stay for 2-3 years and if you can't commit to remaining in one place for at least few years, then owning a home is probably not for you. With the registration fees and other transaction costs of buying and selling a home, you may end up losing money if you sell within a short period even a rising real estate market. Suppose, if prices of properties are falling you may end up with huge loss. So before going to buy a house/apartment first decide how long you are going to reside there, if your answer is long term say above 5 years, go ahead and buy the house otherwise drop your idea.

2. Explore the possibility of availing a loan at a competitive rate

Since you most likely will need to get a loan to buy a house, you must make sure that you will be able get the loan as much as required for the full/part payment of the property value. Please note that, the interest rate varies from Bank to Banks and now after NBFCs started competitive rates, you have more choices. In this context, you should also check other fees such as processing fee, documentation fee, and any prepayment penalty associated with the home loan. At the same time do research on the best option that banks offer. Home loan is a huge amount and hence even a difference of 0.5% can make big difference in pay-outs. You should also get the maximum tax benefit from your home loan. See if you can make your spouse as co-applicant and avail the tax benefits. You will simply double the tax benefits if there are two co-applicants.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about 30-40% of your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. This is one of the most crucial decisions. Know the amount of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offers.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest loans that require a down payment of 10-20% of the value of the property you are planning to buy. In case you are unable to find source to this basic 10-20%, you may have to pay interest at higher rates.

5. Buy in a good location with all basic facilities

The most important part of a real estate piece is location. Even if you have to pay little extra, you should do it. The most important aspect of the right location is future prospect of big construction such as mall, IT Park, company, SEZ, airport, railway lines, or any other commercial space. Apart from this, the points to consider in any location are the following: Availability of civic amenities such as power, water, roads, calm environment, and closeness to main road, markets, shopping malls, schools, and hospitals etc, possibility of renting out your home if required. Good schools located nearby are an added advantage. In most areas, this advice applies even if you don't have school-age children; the reason is that, when it comes time to sell, you will realize that good schools and other basic facilities around are a top priority for many home buyers, thus helping to boost property values.

6. Do your homework before taking the decision

Do your home work before decided to buy a home and to ensure that the home you are planning to buy is suitable for your living at least for the coming 10-15 years and also have enough space to accommodate the expected increases in the number of family members. Also, ensue that the prices you are paying is worth to the facility provided.

7. Avail the service of a professional

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the entire process.

8. Select a builder with good track records

Before buying an apartment, please check the credibility of the builder and also make sure that, the builder has delivered all his past projects within the time limit with specified quality. In case you observed any delay or failure form the part of the builder to deliver the project don’t buy apartment from that builder. You have to have long term view of your investment. The property should be stable enough to last 40-50 years so that if you want to sell it and buy another home, you should be able to do it without much hassle. This is where buying from a reputed builder becomes more important. At the same time, explore the possibilities of linking your loan disbursal based on the progress of the construction work instead of pre-determined specified timings.

9. Verification of Legal Documents

Always look for apartments which are pre-approved by the financial institutions. This will one way ensure that, the property title and other documents are verified and approved by the financial institutions and they are supposed to be in order in all respects. Also insist the builder to show you the original title document of the land. For your safety and to ensure that, all documents are in order, you need to engage a lawyer who can search and verify the title and associated documents before you buy the home. You should get everything in writing from the builder. The sale deed should be duly signed by both the buyer and the seller. You should also ensure that lay out plan, building plan, number of floors, and ownership documents are in order and builder has got necessary approval from the concerned Government authorities. You should take legal help from a lawyer if you do not understand any document. Apart from these documents, make sure to get the encumbrance certificates from the sub-registrar. The encumbrance certificate tells you the details of property dealings and other ownership transfer of the property for the last 30 years. All taxes (including land tax and panchayat/municipal/corporation tax) should have been paid on the property. You should get the proof of paying this tax from the builder; also verify the, the NOC certificate from water and electricity authorities.

10. Hire the service of an expert civil engineer

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house/apartment is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road

What is DTAA (Double Taxation Avoidance Agreements)?

Double Taxation Relief

The incidence of Double taxation occurs when an individual is required to pay tax more than one time for the same income he generated from a country different from his home country. Double taxation occurs mainly due to overlapping tax laws and regulations of the countries where an individual operates his business or employs. . Consistent with the practice adopted in most of the countries in the world that have taken to levy tax on income / capital, India has adopted the system under which Income Tax on residents is imposed on the "total world income" i.e. income earned anywhere in the world. Whereas a tax payer’s own country (referred to as home country) has a sovereign right to tax him, the source of income may be in some other country (referred to as host country) which country also claims a right to tax the income arising in that country. The result is that income arising to a resident out of India is subjected to tax in India as it is part of total world income and, also in host country which provides the source for that income.

India has entered into Avoidance of Double Taxation Agreement (DTAA) with 65 countries including countries like U.S.A., U.K., Japan, France, Germany, etc. The agreement provides relief from the double taxation in respect of incomes by providing exemption and also by providing credits for taxes paid in one of the countries. These treaties are based on the general principles laid down in the model draft of the Organization for Economic Cooperation and Development (OECD) with suitable modifications as agreed to by the other contracting countries. In case of countries with which India has double taxation avoidance agreements, the tax rates are determined by such agreements and vary between countries. Apart from providing ways and means to avoid double taxation of same income, the agreements generally provide for other matters of common interest of the two countries such as exchange of information, mutual assistance procedure for resolution of disputes and for mutual assistance in effecting recovery of taxes

Unilateral Relief

The Indian government provides relief from double taxation irrespective of whether there is a DTAA between India and the other country concerned, if
1.The person or company has been a resident of India in the previous year.
2.The same income must be accrued to and received by the tax payer outside India in the previous year.
3.The income should have been taxed in India and in another country with which there is no tax treaty.
4.The person or company has paid tax under the laws of the foreign country concerned.