Double Taxation Avoidance Agreements: A Critical Analysis From An Indian Perspective

Abstract

ABSTRACT

The DTAAs are the most important tools in international taxation, where they address the negative impacts of the taxation of cross-continent trade and investment while simultaneously preventing fiscal evasion. In this paper, a critical overview of DTAAs is given from an Indian perspective, highlighting the history behind the advent of DTAAs, their principles and the sophisticated provision to curb the abuse that India has put in place. It investigates the intricacies of the notions of Permanent Establishment (PE), taxing of the various sources of incomes (business profits, passive income, and capital gains), and the pitfalls in disputing. [1]

A major part of the discussion is on the drastic effects of the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative and the Multilateral Instrument (MLI) on the treaty policy of India. The debate indicates that India has had a policy change in its strategies of taxing and protection of its revenue sources more by asserting higher degrees of source-based tax rights and revenue protection than a historically more investment-driven approach. The article ends by laying out developing concerns such as the digital economy taxation discussions (Pillar One and Pillar Two) and provides prospective reflections of how India is likely to compete with international tax standards in the near future. [2]

[1] Organisation for Economic Co-operation and Development (OECD), Model Tax Convention on Income and on Capital: Condensed Version 2017 (OECD Publishing 2017).

[2] OECD/G20 Inclusive Framework on BEPS, Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy (8 October 2021).