What is double taxation?
Double taxation agreements are such an agreement where income is likely to be taxed twice. It can be levied in either of the two ways like juridical or economical. If income is to be taxed twice in the same country in the hands of two different individuals, then it is double economic taxation. On the other hand, if income earned outside of a country is taxed twice (once in the home country and once abroad) in the hands of the same individual, then it is juridical double taxation.
How can Double taxation be avoided?
A taxpayer is not likely to do much to escape double taxation agreements. Nevertheless, the income tax department provides some specific provisions for giving relief to a taxpayer whose income is to be taxed twice. This provision is known to be DTAA (Double Taxation Avoidance Agreement).
Exploring about DTAA
Against Double taxation agreements, there is a Double Taxation Avoidance Agreement. This is regarded as a tax treaty that a country signs with another country. An individual taxpayer of a country can avoid being taxed two times by using relevant provisions of this distinct treaty. DTAA can be of two types such as comprehensive agreement and specific treaties. The comprehensive agreements cover each type of income while the specific treaties focus on certain kinds of income.
For example, if there is a DTAA between USA and UK, then the income of an individual earning abroad is to be taxed depending on the residential status of that person. This treaty is to properly streamline taxation in the best way possible. Moreover, it thus ensures that an individual is not supposed to be taxed twice. So many professionals and individuals reap the benefits of DTAA agreements. It would help if you also did the same.