Most NRIs pay excess tax not because they are ineligible for DTAA benefits, but due to gaps in documentation, incorrect filings, or improper application of treaty provisions. In the absence of valid DTAA documentation, Indian banks and payers apply domestic Tax Deducted at Source (TDS) rates by default, which are often 20 percent or higher. This results in higher upfront tax deductions and delayed refunds.

Double Taxation Avoidance Agreements (DTAAs) are bilateral treaties signed between India and other countries to prevent the same income from being taxed twice—once in India and again in the country of residence. DTAA provides clarity on taxing rights, concessional tax rates, and relief mechanisms, making cross-border taxation predictable and fair for NRIs.

No. DTAA does not eliminate tax but allocates taxing rights between countries and provides mechanisms such as tax credits, exemptions, or reduced tax rates. The objective is to prevent duplication of tax, not to make income tax-free.

DTAA relief applies when:

• Income is taxable in both India and another country, and
• One party is a non-resident or foreign entity

Importantly, DTAA applicability depends on tax residency, not citizenship or nationality. The “Residence” article of the relevant DTAA determines eligibility.

DTAA provisions generally apply to:

• Salary and professional income
• Interest from NRO accounts and fixed deposits
• Rental income from property in India
• Capital gains from Indian assets
• Dividends, royalties, and fees for technical services

Relief depends on treaty-specific conditions and income classification.

When applied properly, DTAA allows NRIs to:

• Avoid double taxation on the same income
• Reduce TDS on Indian income
• Claim foreign tax credit in the country of residence
• Improve cash flow by avoiding excess tax deductions and refunds

DTAA uses three primary methods:

1) Foreign Tax Credit (FTC) Method

Tax paid in one country is allowed as a credit in the other country, limited to the tax payable on that income.

2) Exemption Method

Certain income is taxed in only one country and is fully exempt in the other.

3) Reduced or Special Tax Rates

DTAA prescribes lower withholding rates compared to Indian domestic law, allowing NRIs to claim refunds or apply lower TDS.

If tax has already been paid in one country, India allows a credit for such tax, but only up to the Indian tax payable on that income. Any excess foreign tax paid cannot be refunded by India, ensuring that the income is not taxed twice.

Under this method, specific income is taxable exclusively in one country and exempt in the other. This depends on the relevant DTAA article and the nature of income, such as salary, pension, or employment income.

Many DTAAs prescribe concessional withholding rates that are lower than Indian domestic rates. If excess TDS is deducted, NRIs can claim a refund in India and may also claim foreign tax credit in their country of residence.

To claim DTAA relief, NRIs must submit:

• Tax Residency Certificate (TRC)
• Form 10F (filed electronically)
• PAN card
• DTAA self-declaration to the payer
• Passport and valid visa copies
• OCI/PIO card (where applicable)
• Form 67 for claiming foreign tax credit

Even one missing document can lead to the denial of DTAA benefits.

Incomplete or incorrect documentation can result in:

• Higher TDS deductions
• Rejection of concessional DTAA rates
• Delays in refunds
• Tax notices or assessment queries

In most cases, excess tax can only be recovered through a lengthy refund process.

Section 90(2) of the Income Tax Act, 1961 provides for a treaty override:

• If domestic law is more beneficial, it applies
• If DTAA offers better relief, the treaty prevails

However, if a Permanent Establishment exists in India, business income may still be taxed under Indian law.

Yes. Section 89A provides relief to returning NRIs by deferring taxation on income from notified foreign retirement accounts until actual receipt, subject to prescribed conditions. 

India has DTAAs with nearly 100 countries. Indicative concessional rates include:

• US, UK, Canada, Australia, Singapore: ~15 percent
• Germany, South Africa, New Zealand: ~10 percent
• UAE: ~12.5 percent
• Mauritius: 7.5–10 percent

Actual rates depend on income type and treaty articles.

NRIs should:

• Determine tax residency under the applicable DTAA
• Obtain a valid TRC
• Identify eligible income streams
• Map income to relevant DTAA articles
• Ensure accurate documentation and filings

Professional advice is recommended due to treaty complexity and procedural risks.

India’s DTAA framework offers structured and legitimate tax relief to NRIs, OCIs, and PIOs. However, eligibility alone is not enough. Proper documentation, accurate treaty interpretation, and procedural compliance are essential to avoid excess tax deductions and prolonged refund processes. Given the complexity of cross-border taxation, consulting qualified tax professionals in India and the country of residence is strongly advisable. 

VFSL offers end-to-end DTAA advisory tailored specifically for NRIs, OCIs, and cross-border taxpayers. Our approach goes beyond treaty interpretation—we focus on practical execution, ensuring correct residency determination, accurate mapping of income to DTAA articles, and complete documentation to prevent excess withholding and refund delays. With deep expertise in Indian income tax law, international taxation, and treaty application, VFSL helps NRIs minimise tax exposure while remaining fully compliant.