India has been attracting a significant amount of foreign direct investment (FDI) over the years, and one of the reasons behind it is the double tax avoidance agreement (DTAA) that the country has with various nations.
A DTAA is an agreement between two countries that aims to eliminate double taxation of income by allocating taxing rights between the two nations. It helps in avoiding situations where the same income is being taxed twice, once in the country where it was earned and then again in the country where it is being received.
India has signed DTAA with more than 90 countries, which means that foreign investors can repatriate profits earned in India with a lower tax liability. This gives investors a sense of fiscal certainty and reduces the risk of double taxation, making India an attractive destination for foreign investments.
The DTAA also helps in creating a conducive business environment by providing a framework for resolution of disputes related to taxation. It helps in avoiding situations where companies are forced to pay taxes in a foreign country, despite having paid taxes in their home country.
Moreover, the DTAA also helps in improving bilateral trade relations between countries. It provides a mechanism for countries to cooperate in the area of taxation, which can lead to the signing of other agreements related to trade and commerce.
India`s DTAA network is one of the largest in the world, and it covers major economic powers such as the United States, United Kingdom, Singapore, and Mauritius. This has been instrumental in attracting significant FDI in the country, especially in sectors such as manufacturing, infrastructure, and services.
In conclusion, India`s DTAA network plays a vital role in attracting FDI to the country by providing investors with a sense of fiscal certainty, reducing the risk of double taxation, and improving bilateral trade relations. It is a testament to India`s commitment to creating a conducive business environment that fosters economic growth and development.