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CS Professional · Advanced Direct Tax Laws and Practice · Double Taxation Avoidance Agreement (DTAA)

Under the Income-tax Act, 2025 (applicable from June 2027), which of the following is a purpose for which the Central Government may enter into an agreement with a foreign country under section 159?

Exchange of information for preventing evasion or avoidance of income-tax, or investigating such cases, is a listed purpose of a tax agreement under section 159(3). The section does not authorise treaties to fix domestic company rates, grant GST exemption or decide residential status.

  1. AExchange of information for prevention of evasion or avoidance of income-tax, or investigation of such casesCorrect
  2. BFixing the rate of income-tax payable by domestic companies
  3. CGranting exemption from GST on cross-border supplies
  4. DDeciding the residential status of Indian citizens for all Indian tax purposes

Explanation

Section 159(3)(c) lists exchange of information for preventing evasion or avoidance of tax, or investigating such cases, as a permitted purpose of an agreement. The other options are not purposes listed in section 159(3).

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