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The Double Taxation Avoidance Agreement (DTAA) between India and Germany has played a crucial role in improving economic ties. Prior to its introduction, citizens of both countries had to pay taxes twice on the same income in different countries, which made it difficult to invest and work in foreign countries. This agreement aimed to eliminate such tax-related obstacles, encouraging cross-border investments and trade. In this guide, we will learn about the intricacies of DTAA between India and Germany.
DTAA between India and Germany was first signed in 1991 when only a few German states were included in it. Later, in 1993, 5 new states were added to the DTAA. The articles of this contract are applicable to the countries getting into this contract, i.e., India and Germany.
DTAA between India and Germany consists of 28 sections that focus on eliminating double taxation on foreign income. This agreement helps taxpayers claim tax benefits in the form of returns and exemptions on foreign income.
This agreement was created with the aim of making sure that the citizens working on foreign lands and earning foreign income are taxed fairly. Here’s why the DTAA between India and Germany is significant -
Foreign investors in India can be classified into different categories. Given below are the types of foreign investors in India -
The Double Tax Avoidance Agreement (DTAA) between India and Germany provides tax relief for various income sources, considering taxes applicable in either India, Germany, or both. The DTAA encompasses the following types of taxes:
In the Federal Republic of Germany (German Tax):
In the Republic of India (Indian Tax):
Additionally, any other taxes that fall under similar categories are included in the DTAA.
Given below are the tax rates for different types of income sources -
The India-Germany Double Taxation Avoidance Agreement (DTAA) has been a vital catalyst in strengthening economic relations. Established in 1991 and expanded over the years, it eliminates double taxation hurdles, encouraging cross-border investments and trade. The DTAA promotes fair taxation for citizens working abroad, reduces tax evasion, and fosters foreign investment. It is important to understand the various aspects of DTAA between India and Germany to maximize the benefits of this agreement. It can be difficult for normal people to understand this complex law. Therefore, it is the best idea to get expert consultation from qualified CAs.
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If a Double Tax Treaty (DTT) is in place, double taxation is typically prevented by exempting the foreign income with progression. Foreign income taxes can be credited against German income tax only if the applicable DTT provides for a tax credit or if no DTT exists.
A tax of 15.83% (comprising 15% plus a 5.5% solidarity surcharge) is withheld from gross royalties paid to non-residents. Starting 1 July 2021 reduced withholding tax rates or exemptions are not applicable to royalty payments made to EU-listed non-cooperative jurisdictions.
As an NRI, the money you send to India is not subject to taxation. However, the recipient in India, if a resident, will face tax implications on the received funds.
According to the Foreign Exchange Management Act (FEMA), any designated family member can receive money without being liable for tax. There is also no limit on the amount you can send to your parents. Under FEMA rules, any amount sent as a gift to eligible relatives is tax-free.
