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Cross-border taxation for the NRIs refers to the NRI who generates an income from one country and lives in another country. It is a taxation that sets the rules and regulations that manage international transactions. Cross-border taxation is crucial for every single individual and organisation who do international transactions.
Here are the steps to apply the DTAA:
Step 1: First, you need to find out the type of income on which the DTAA applies and the tax liability under the Income Tax Act.
Step 2: You need to see the tax liability under the DTAA if your income falls under the DTAA-specific articles.
Step 3: You need to finalize your tax liability by the use of section 90(2) and choose the advantageous one between the Income Tax Act and DTAA.
Cross-border taxation is especially relevant for a single individual who is earning in one country and residing in another. These types of income are taxable in both countries. However, with the Double Taxation Avoidance Agreement (DTAA), you only need to pay tax in one country, but the tax you paid in another country is claimed as a credit other country under the DTAA provision.
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To claim the cross-border benefits, there are three methods, which are: