We often associate the word ‘double’ with something positive. For example, double the fun, double the income, double the profit, etc. However, the reverse could be as heartbreaking for people. For example, the prospect of paying taxes two times for a single income (double taxation) can fill us with us dread and grief. This is not surprising as anyone would feel bad if he or she is forced to pay taxes at two places on a single income.

What is Double Taxation?

People who are moving outside India to find meaningful working opportunities in other countries have to pay taxes in that country according to extant tax laws of that country. However, there may be a majority of such people who have made certain investments in their home country, India. This makes them liable to pay income tax on income made from such investments in India. To put it in layman terms, you earn ‘X’ in the US and pay taxes in that country. You earn INR’Y’ in India and pay taxes on that amount in India. This is a simple rule that everybody finds acceptable and within the means of reason and sense.

How can NRIs Avoid Double Taxation?

There is a cause of concern, however, when the person is taxed twice in two different countries on a single income.If a person is resident of one country( X for example) but his income originates in another country(Y for example),the poor fellow is forced to pay taxes in both the countries X and Y. In other words, he is a victim of Double Taxation. Double taxation as the name implies refers to the provision of a person being taxed in two countries for the same income.

How can NRIs Avoid Double Taxation?

The way out is to make use of the provisions of the Double Taxation Avoidance Agreement (DTAA), a tax treaty India has signed with many countries. Such Tax treaties ensure that the same income is not taxed twice.The purpose is to promote and foster economic trade and investments between two countries. The treaty can apply to two or more countries and can therefore termed to be either unilateral or bi-lateral. India has entered into tax treaties with a hundred-odd countries, including US, UK, Canada, Australia and Germany, which are popular destinations for the Indian diaspora.

Double Taxation is avoided in three ways

Exemption Method: The country in which a person resides does not charge taxes on the income earned in another country. What it means is that income is taxed in only one of the two countries. I.e. the tax residence country concedes a foreign assessment credit for the taxes paid in the other nation.

Deduction method: According to this method, Tax paid in the country of source is subtracted from the Global income and then income tax is paid on the amount left after deduction.

Credit method: The country of tax residence grants a foreign tax credit for the taxes paid in the other country. A deduction is allowed from its own taxes for taxes paid in country where income was earned. There are a few variations of the Credit method:

  • Ordinary credit method
  • Underlying Tax Credit method
  • Tax Sparing credit

What Clients Say

Customer delight is our main goal and we are very serious about it.

Prakash Verma

Prakash Verma

“Finacbooks.com is a perfect example of a great customer service dealing with the best of accountancy services.“

Prakash Verma Signature

Praveen Chauhan

Praveen Chauhan

“They offered us good quality services in a least possible time at a best Price.“

Praveen Chauhan Signature

Pradeep Kochhar

Pradeep Kochhar

“Finacbooks.com is a trusted network of highly qualified accounting professionals who not only provided us quality accountancy services but also supported us by answering our each & every query on time without any delay. “

Pradeep Kochhar Signature

Informational, useful and resourceful


Catch up our trending topics, news etc. in a simple, detailed and most professional way.

How to Renew Your FSSAI Food License?
01 Apr, 2020

What is FSSAI Food License? FSSAI food license is a mandatory requirement for every food business operator (FBO) involved in business of... Read More

Coronavirus: Central Government Economic Measures to Fight Covid 19 Crisis
27 Mar, 2020

Relief package of Rs.1.7 lakh Crore announced by the Finance Minister to fight Coronavirus Our central government has taken many... Read More

Corporate Social Responsibility (CSR) in India
24 Mar, 2020

What is Corporate Social Responsibility (CSR)? Corporate social responsibility means managing of business processes by fulfilling its... Read More


We Are Everywhere

We are having a wide network operating all across India as well as Internationally.
World Map

Contact Us

30+ Offices in

10+ Years Experience

Save Your

Quick Turn around Time

Qualified Professionals

Excellent Customer Service



We value client relationships and making it better with each passing day.

Rated 4.5 out of 5 based on 1,234 reviews on FinacBooks Logo

Pan India Network

Our Network

Connect with our chartered accountant in your city

Sign up to our


Tax news for chartered accountants, businesses and individual.