STEP i

Where he visits

Where he

resides

r e s o u r c e s

to enjoy common

It’s a fee a person pays

Where he transacts

Tax on Earnings

Tax on

Consumption

Direct Taxes

Indirect Taxes

With developments in

business and commerce

t a xe s h a v e e v o l v e d

NOT

Tax is

Consequent to a transaction

Determinant of a transaction

STEP I i

INCOMETAX ACT

1961

Sec115C to 115-I

Sec 90 / 91

Sec195

Sec 6 / 9

Resident

Stay of 182 days

Stay of 60 days

If Last 4 years stay of 365 days

Non resident

9 of 10 years

<729 days in 7 years

OR

Tax in India

On Income

ReceivedEarnedAccrued

20% on Gross Investment Income

Rate of TAX

Resident Individual rates

20%

Rate of TAX10%

40%

Special provisions…

Person of Indian Origin

Citizen Of India

Non Resident

Investment IncomeLTCG Specified Assets

Shares

Deposits

Debentures

Government Security

NO Return Of Income

Investment Income @20%

Long Term Capital Gains @10%No Indexation

Capital Gains in Fx

Option Of the assesseeYear – on – year basis

STEP I I i

International Trade

Where to Tax ?

Source Tax

Resident Tax

Resident of Two Countries

Taxation

DOUBLE

Judicial Double Taxation

Different Jurisdiction

Same IncomeSame Person

Economic Double Taxation

Different Jurisdiction

Same IncomeDifferent Person

do

NOTCREATE

Tax Treaties

they LIMIT exercise

Taxing Rights

Model Conventions

OECD

Developing

Countries

Residence

UNDevelo

ped Countri

es

Source

US

World Income

Judicial Double Taxation

Different Jurisdiction

Same IncomeSame Person

Economic Double Taxation

Different Jurisdiction

Same IncomeDifferent Person

Bilateral

Bridge that

connectsThe Domestic tax

laws Of 2 Countries

TAX TREATIE

S

Br o

ad

l y

7 Sections

Scope of Conventi

on

Definitions

Taxation of

Income

Taxation of Capital

Elimination of

Double Tax

Special provisions

Final provision

s

Scope

of

Convent

ion

Article 1: Applicability

Article 2: Taxes Covered

WHO ? WHAT ?

Definitio

ns

Article 3: General Terms

Article 4: Residence

Article 5: Permanent Establishment

WHO ?

Taxatio

n of

Income

Article 6 to 21: Types of Income

What ?

Taxatio

n of

Capital

Article 22:

What ?

Elimina

tion of

Double

Tax

Article 23: Tax Credits, etc

How ?

Special

provisio

ns

Article 24 to 29:

Where?

Final

provisio

ns

Article 30 - 31:

When ?

STEP I v

TAX CREDITS

Unilateral

Domestic Law

BilateralTax Treaties

• Full Credit• Ordinary Credit

Credit method

• Tax in one country onlyExemption Method

• Economic Double tax reliefUnderlying Tax Credit

• Deemed Tax CreditTax Sparing

• Full Credit

•Ordinary Credit

Credit method

HOW ….. Ordinary

Ordinary Credit

Item / Source

Category

Country

Worldwide

STEP v

TAX TREATIES

236 countries

204 sovereign

193 part of UN

85 Tax Agreements

3 Terminated

13 Limited

73 Comprehensiv

e

73 Comprehensiv

e

13 Limited

Afghanistan (1975)

Bulgaria (1977)

Czechoslovakia (1978)

Ethiopia (1976)

Iran (1973)Kuwait (1982)

Lebanon (1968) Pakistan (1988)

USSR (1976)

Saudi Arabia (1991)

UAE (1989)

Yamen Arab Republic (1986)

Peoples Democratic Republic of Yamen (1988)

3 Terminated

Pakistan (1947)

Union of Soviet Socialist Republic(1989)

Czechoslovakia (1986)

conclude

to

Income – Source OR Residence

Domestic Tax Laws

Special Provisions

Tax Treaties

Tax Credit in Home Country

FINALLY….

Abdulla PettiwalaCorporate Tax Team,

29-Sep-11