Understanding DTAA Between India and Singapore

What is DTAA Between India and Singapore?

A double Tax Avoidance Agreement or DTAA treaty is a written agreement that is signed by two countries to ensure that its residents do not have to pay tax twice on the same income in different countries. DTAA between India and Singapore helps the residents of both countries claim tax benefits and improves relations between countries.

As per this agreement that was signed in 1944 and last amended in 2020, the residents of Singapore who are earning income from India can claim the same tax benefits as that provided to Indian residents earning income in India.

What is the Significance of India Singapore DTAA for Both Countries?

Given below are the major benefits of India Singapore DTAA for both countries -

• The most important benefit of DTAA between India and Singapore is the improvement of international and trade relations between both countries and a growth in trade and investments. This DTAA allows Singaporean investors to invest and establish their branches in India.
• It also helps prevent tax evasion and contributes to making trade easier across nations. It makes sure that the income earned by the residents in one country is taxable only in that country.
• DTAA between India and Singapore also provides an information exchange between the contracting countries' tax authorities.
• Some other benefits of India Singapore DTAA include exemption from taxes, lower TDS rate applicability, and tax credits.

What are the Taxes Covered Under DTAA?

The provisions of India Singapore tax treaty apply to both countries, i.e., India and Singapore. This agreement covers different types of taxes, which are mentioned below -

Taxes applicable as mentioned in the agreement

In India:

Income Tax (including surcharge), also referred to as Indian Tax.

In Singapore:

The income tax of Singapore is also known as ‘Singapore Tax.’

This treaty applies to similar taxes that are imposed by the contracting states.

What are DTAA Rates Between India and Singapore?

Many countries apply withholding tax on different sources of income. For example, Singaporeans receiving dividend or interest income from Indian companies have to pay a 15% tax on the gross dividend income. The country of origin levies a 15% tax on interest income. While technical service fees received are subject to 10% tax in the country of origin, income from royalties is subject to 10% tax.

There are various other sources of income that are in the country of origin. It includes income from sources of shipping and airline business profits, income from employment, government payouts, business profits, and income from immovable property. Income earned from interest is also subject to TDS. The TDS rates can vary from country to country. For Singapore, the TDS on interest is leviable at @15%.

India Singapore DTAA - Capital Gains Taxation

Article 13 of DTAA between India and Singapore entails the provisions for taxation of capital gains. The following are the provisions -

• Earnings from alienating ships or aircraft operated internationally or any other movable property that is related to the operations of these ships and aircraft are subject to tax as per the tax laws of the recipient’s residence country.
• Profits earned by a resident of one country from the transfer of real estate located in another country are subject to taxation in the latter nation.
• All other capital gains are levied to tax in the taxpayer’s country of residence.

India Singapore DTAA - Employment Income Taxation

Article 15 of DTAA between India and Singapore deals with the taxation of employment-related income or salary income. Given below are the provisions of this tax -

• Salary or employment income earned by a resident of a country who has his employment source in another country is subject to tax in the country in which the income is received.
• Earnings from employment onboard an aircraft or a ship operating in an international territory by one of the contracting country’s enterprises are taxable in the same country.

Yet, the tax may be imposed by the taxpayer's home country rather than the host nation. The following rules apply in such a situation -

• Payments are not made through a permanent establishment in the host country.
• Salaries and wages are paid on behalf of a non-resident employer in the country of employment.

This agreement has not only facilitated trade, investment, and cooperation but has also simplified the lives of taxpayers. However, as the tax landscape continually evolves, it prompts us to ponder: What might the future hold for the India-Singapore DTAA? How will changes in tax laws, economic circumstances, and global dynamics impact the effectiveness of this agreement? As we navigate the complexities of cross-border taxation, it is crucial to stay informed, adapt to new regulations, and make the most of the benefits that DTAA offers.

For individuals and businesses concerned about tax liabilities arising from income earned in Singapore, the DTAA regulations offer a mechanism to ensure fair taxation on their gross income. This not only helps in avoiding double taxation but also promotes transparency and confidence in cross-border economic activities.

Furthermore, the DTAA serves as a catalyst for enhancing bilateral cooperation in various sectors, including finance, technology, and infrastructure. Reducing tax barriers and providing certainty in tax treatment facilitates a conducive environment for businesses to expand their operations and explore new opportunities in both markets. For more clarification and to know how to avail the benefit of DTAA, consult our tax experts.

Recent Developments in DTAA Between India and Singapore

The India-Singapore Double Tax Avoidance Agreement (DTAA) has recently been updated to tackle new challenges and stick to international standards. Key changes include revised provisions on tax residency, permanent establishment, and capital gains taxation. These updates have brought increased clarity and certainty for taxpayers, significantly affecting businesses and individuals conducting operations between India and Singapore.