The Double Taxation Avoidance Agreement (DTAA) signed between India and Israel is a crucial agreement that aims at preventing double taxation of income earned in both countries. This agreement is essential for businesses operating in both countries as it ensures that they are not taxed twice on the same income.

The DTAA, signed in 1996, has been in effect since 1997 and has been amended several times to keep up with changing economic and financial environments. The latest amendment to the DTAA was made in March 2020, which came into effect from 1st April 2020.

Under this agreement, both countries have agreed to provide relief from double taxation by either exempting or allowing a credit against the tax in the other country. This means that if an Israeli company operating in India pays taxes in India on its income, it will be exempted from paying taxes in Israel on the same income. Similarly, if an Indian company operating in Israel pays taxes in Israel on its income, it will be allowed a credit against the tax payable in India on the same income.

The DTAA covers various types of income, including business profits, dividends, interest, royalties, and capital gains, among others. It also provides for the prevention of tax evasion and allows for the exchange of information between the tax authorities of both countries.

The DTAA has several benefits for businesses operating in both India and Israel. For example, it provides certainty to taxpayers regarding their tax liabilities, eliminates the possibility of double taxation, and encourages cross-border investments by reducing the tax burden on such investments. It also helps in avoiding double taxation of individuals who move between the two countries for employment or other purposes.

In conclusion, the Double Taxation Avoidance Agreement between India and Israel is an important agreement that promotes bilateral trade and investment by providing certainty and clarity regarding tax liabilities. This agreement is crucial for businesses operating in both countries and ensures that they are not taxed twice on the same income. The latest amendment to the DTAA further strengthens the tax treaty and provides additional benefits to taxpayers.