DTAA (double taxation avoidance agreement): meaning and use
A DTAA is a tax treaty between India and another country that prevents the same income being taxed twice. Claiming it needs a tax residency certificate.
Short answer
A DTAA (double taxation avoidance agreement) is a tax treaty between India and another country that allocates taxing rights over cross-border income, such as business profits, dividends, interest, royalties and fees for technical services, so the same income is not taxed fully in both countries. Under the Income-tax Act, 2025, treaty relief is in section 159, formerly section 90.
- Provision
- Section 159, Income-tax Act 2025 (formerly section 90)
- Proof of residence
- Tax residency certificate (TRC) from the home country
- Rule
- Taxpayer may apply the treaty or domestic law, whichever is more beneficial
- Anti-abuse
- Principal purpose test and domestic anti-avoidance rules
How a DTAA works
A treaty either exempts certain income in one country or caps the tax rate the source country can charge, with the residence country giving credit for tax paid abroad. For example, a treaty may limit Indian tax on royalties paid to a foreign company to a lower rate than the domestic rate. A non-resident claiming treaty benefits must obtain a tax residency certificate and furnish prescribed details, previously Form 10F, and have a PAN in India. Many treaties have been modified by the Multilateral Instrument, which adds a principal purpose test to deny benefits to arrangements mainly aimed at obtaining them.
Where startups use DTAAs
Treaties come up in several common situations, both for payments made by Indian startups to foreign parties and for income they earn abroad from overseas customers, so check the relevant treaty article each time.
- Paying fees or royalties to foreign vendors and deciding the TDS rate
- Receiving income from foreign clients where tax is withheld abroad
- Claiming foreign tax credit in the Indian return
- Dividends paid by an Indian subsidiary to its foreign parent
- Founders who are tax residents of another country
Why it matters for startups
Applying a treaty rate without a valid TRC and supporting documents can make the Indian payer liable for short deduction of TDS, plus interest. Before remitting, collect the TRC, the prescribed declaration and a no permanent establishment declaration where relevant, and complete the remittance forms, which under the 2026 rules are Forms 145 and 146.
Related services
Sources
- EZTax: Income-tax Act 1961 vs 2025 section mapping
- Business Today: income-tax forms changing from 1 April 2026
- Income Tax Department: Acts, rules and circulars
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Does India have DTAAs with most countries?
India has comprehensive tax treaties with many countries, including most major trading partners. Always check the specific treaty.
Is a TRC enough to claim DTAA benefits?
A TRC is necessary but may not be sufficient. The tax officer can deny benefits under anti-abuse rules, and other documents may be required.
What replaced Forms 15CA and 15CB?
Under the Income-tax Rules, 2026, the remittance declaration is Form 145 and the accountant's certificate is Form 146.