Skip to content

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

Under the Income-tax Act, 2025 (applicable from the June 2027 session), where the Central Government has notified a double taxation avoidance agreement that applies to an assessee, how do the provisions of the Act apply to that assessee?

The Act applies to the extent it is more beneficial to the assessee. Where a notified agreement applies, the assessee can choose whichever of the treaty or the domestic law gives the lower tax burden, as laid down in section 159(4) of the Income-tax Act, 2025.

  1. AThe Act applies only to the extent it is more beneficial to that assesseeCorrect
  2. BThe Act applies in full and the agreement is ignored
  3. CThe agreement applies in full even if the Act is more beneficial
  4. DThe Act applies only if the other country also agrees by a separate notification

Explanation

Section 159(4) provides that, for an assessee to whom a notified agreement applies, the provisions of the Act apply to the extent they are more beneficial to that assessee. So the assessee gets the better of the treaty and the domestic law. The option saying the agreement always prevails ignores this beneficial-provision test.

Did you get it right without looking?

One question tells you little. A timed set on Double Taxation Avoidance Agreement (DTAA) shows your real accuracy, how long you take and where you lose marks.

Practise Double Taxation Avoidance Agreement (DTAA)Free diagnostic mock

More Double Taxation Avoidance Agreement (DTAA) questions