« Top Headlines » Open DEMAT Account in 24 hrs  No more tax filing hassles with digital Form 16 Know how it works «  Budget-08: Cut in taxes, duties top India Inc wish list... Income tax exemptions for senior citizens... » India signs tax pact with Iceland November, 26th 2007 India on Friday signed a Double Taxation Avoidance Agreement (DTAA) with Iceland. Besides avoidance of double taxation and prevention of fiscal evasion in respect of taxes on income, the agreement aims at promoting economic co-operation between the two countries. The agreement was signed by finance minister P Chidambaram and his counterpart from Iceland Arni Mathiesen. Mr Chidambaram expressed the confidence that the agreement would result in high degree of comfort for investors of both the countries. Arni Mathiesen, in his response, said that DTAA would facilitate flow of more investment in both the countries and further enhance mutual economic relationship. DTAA between India and Iceland which will come into force after it is notified, covers income-tax as well as surcharge in the case of India. In the case of Iceland, income-tax paid to the state and to the municipalities are taken into account. DTAA provides for taxation of dividend, interest, royalties and fees for technical services-both in the country of residence as well as the country of source. However, the rate of tax in the country of source shall not exceed 10% of the gross amount of payment in case the beneficial owner of the payments is a resident of the contracting state. DTAA provides that capital gains from alienation of shares of a company shall be taxable in the country where the company is a resident. The incidence of double taxation shall be avoided by one country giving credit for taxes paid by its residents in the other country. The treaty also provides for exchange of information in cases under investigation in either of the two countries. Both the countries shall assist each other in collection of revenue claims. There is also a provision for limitation of benefits under DTAA to prevent misuse of the provisions of DTAA, an official statement said. The agreement is expected to stimulate the flow of capital, technology and personnel between the two countries. It will also contribute to the tax stability and facilitate mutual co-operation.