Tax On Remittances For Students, Trainees And Apprentices

What is the purpose of having an Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with UAE by India (DTAA) between UAE and India?

In the Present Era of cross border transactions across the globe, the effect of Taxation is one of the important considerations for any Trade and Investment decisions in another countries.
Where a taxpayer is resident in one country and but has source of income situated in another country, it gives rise to possible double taxation.
DTAA lays down rules for taxation of the income by the Source country and the residence country.

This treaty was entered into by UAE and India with an aim to promote their economic relations and prevent tax evasion.

Scope

This DTAA agreement shall apply to persons who are residents of one or both of the Contracting States (UAE or India).

Taxes Covered

This agreement applies on the following existing taxes:

Income Tax, Corporation Tax and Wealth Tax in UAE
Income Tax and Wealth Tax in India

Article 20 – Students, Trainees and Apprentices

An individual who is a resident of a contracting state and who is temporarily present in other contracting state

As a student at recognized University, college, School or other educational institution or as a business or technical apprentice therein, for a period not exceeding six years from the date of his first arrival shall be exempt from tax on

All remittances from the first mentioned contracting state for the purposes of his maintenance, education or training and

Any remuneration (not exceeding INR 20,000 or its equivalent sum in UAE currency p.a.) for the personal services rendered in that other contracting state to supplement the resources available to him.

For the purpose of study, research or training solely as a recipient of a grant, allowance, award from Government of either of the contracting states, scientific, educational, religious or charitable organization or under technical assistance program entered into by Government of either of the contracting states for a period not exceeding three years from the date of his first arrival shall be exempt from tax on

Amount of such grant/allowance/award

All remittances from first-mentioned contracting state

Any remuneration not exceeding INR 20,000 or its equivalent sum in UAE currency p.a. in respect of services performed in connection with his study, Research

As an employee of, or under contract with an enterprise of the first-mentioned contracting state for the purpose of technical, professional or business experience from a person other than such enterprise, for a period not exceeding twelve months from the date of his first arrival shall be exempt from tax on:

All remittances from the first-mentioned contracting state

Any remuneration, so far as it is not in excess of INR 20,000or its equivalent sum in UAE currency p.a. for personal services rendered in connection with acquisition of such experience.

Under arrangements with the Government of other contracting state for the purpose of training or study shall be exempt from tax in respect of remuneration received.

Elimination of Double Taxation

Where a resident of India derives income or owns capital which, in accordance with the provisions of the agreement, may be taxed in UAE, India shall allow as a deduction from the tax on the income/capital of that resident an amount equal to Income tax or capital tax paid in UAE whether directly or by deduction.
Where a resident of UAE which in accordance with the agreement may be taxed in India, UAE shall allow as a deduction from the tax on income of that person an amount equal to income tax paid in India.
However such deduction shall not exceed that part of Income tax or capital tax as computed before the deduction is given.

Exchange of Information between the tax authorities of UAE and India

The competent authorities of contracting state shall exchange such information as is necessary for carrying out the provisions of the agreement or for the prevention or detection of evasion of taxes.

Limitation of Benefits

An entity which is a resident of a contracting state shall not be entitled to the benefits of this agreement if the main purpose of creation of such entity was to obtain the benefits of this agreement.

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