How can NRIs Avoid Double Taxation?

What is Double taxation?

Double taxation is getting taxed twice on the same income in the two different countries.

Methods to Claim Tax relief under Double taxation?

NRIs can avoid double taxation and can obtain relief by signing a Double taxation avoidance agreement between the two countries.

How can NRIs Avoid Double Taxation?

There are two methods to claim tax relief under DTAA –

Exemption Method

Under exemption method, NRI’s are taxed only in one country and exempted for tax in another country.

Tax Credit Method

Under tax credit method, NRI’S income is taxed in both the countries but he has the option to avail exemption in the country of residence.

Deduction Method

Under this method, Tax you paid in the source country is deducted from your worldwide income and tax is levied on the remaining amount.

Comparison between Exemption Method, Tax Credit Method and Deduction Method to claim tax relief

S. No. Particulars Tax credit method Exemption method Deduction method
1 Source country income 4000 4000 4000
2 Resident country income 4000 4000 4000
3 Exemption deduction (Tax paid in foreign country) (4000) (600)
4 Total income 8000 4000 7400
5 Total tax payable in country of residence on total income (Assume 20%) 1600 800 1480
6 Tax paid in source country on foreign source (income assume 15%) 600 600 600
7 Tax payable in resident country on foreign source income (Assume 20%) 800 - 680
8 Relief available under DTAA (lower of 6 & 7) 600
9 Balance tax payable in country of residence (4-7) 1000 800 1480
10 Total tax paid 1600 800 2080
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Due Dates

  • GSTR-7 Summary of Tax Deducted at Source (TDS) and deposited under GST laws

    Nov 10th ,2021
  • GSTR-8 Summary of Tax Collected at Source (TCS) by e-commerce operators under GST laws

    Nov 10th ,2021
  • GSTR 1 for Oct 2021 (turnover more than INR. 1.50 Crore)

    Nov 11th ,2021
  • GSTR-6 Details of Input Tax Credit (ITC) received and distributed by an Input Service Distributor (ISD)

    Nov 13th ,2021
  • Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending September 30, 2021

    Nov 15th ,2021
  • GSTR-3B is a summary return to be filed by all taxpayers except those registered under the composition scheme, every month. However, from 1st January 2021, there is also quarterly filing option provided to taxpayers with annual aggregate tunrover of up to Rs.5 crore, opting for the QRMP scheme for Oct Month. (Aggregate turnover exceeding Rs.5 crore in the previous financial year)
     

    Nov 20th ,2021