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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Under the Income-tax Act, 2025, the purposes for which India may enter into a double taxation agreement include avoiding double taxation without creating opportunities for non-taxation or reduced taxation. Which practice is specifically named in that provision as something to be guarded against?

The provision names treaty-shopping arrangements aimed at obtaining treaty reliefs for the indirect benefit of residents of any other country. Genuine business deductions, SEZ units and information exchange are not abusive practices; exchange of information is actually a tool to prevent evasion and avoidance.

  1. ATreaty-shopping arrangements aimed at obtaining treaty reliefs for the indirect benefit of residents of any other countryCorrect
  2. BClaiming deductions for genuine business expenditure
  3. CSetting up a subsidiary in a special economic zone
  4. DExchanging information between tax authorities

Explanation

Section 159(3)(b) refers to avoiding non-taxation or reduced taxation through evasion or avoidance, including treaty-shopping arrangements aimed at obtaining reliefs for the indirect benefit of residents of other countries. The other options are legitimate or are tools used against abuse.

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