| Recently the term "Double Taxation" was very common in the news. Consider the following statements regarding Double taxation: |
| 1. The Indian government has entered into tax treaties, known as Double Taxation Avoidance Agreement (DTAA). |
| 2. Relief against double taxation is provided in two ways: Unilateral relief and Bilateral relief. |
| 3. Exemption method and Tax credit method are methods of Unilateral relief. Of these statements: |
A) 1, 2 and 3 are correct
B) 2 and 3 are correct
C) 1 and 2 are correct
D) 1 and 3 are correct
Correct Answer: C
Solution :
[c] Double taxation occurs when an individual is required to pay two or more taxes for the same income, asset, or financial transaction in different countries. Double taxation occurs mainly due to overlapping tax laws and regulations of the countries where an individual operates his business. When an Indian businessman makes a profit or some other type of taxable gain in another country, he may be in a situation where he will be required to pay a tax on that income in India, as well as in the country in which the income was made! To protect Indian tax payers from this unfair practice, the Indian government has entered into tax treaties, known as Double Taxation Avoidance Agreement (DTAA) with more than 83 countries, including U.S.A, Canada, U.K., Japan, Germany, Australia, Singapore, U.A.E, and Switzerland. DTAA ensures that India's trade and services with other countries, as well the movement of capital are not adversely affected.
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