India has signed an agreement with Japan for amending the double taxation avoidance agreement (DTAA) and for preventing fiscal evasion that was originally signed in 1989. This move will help in reducing tax avoidance and act as a deterrent against tax evasion and will also enable assistance in collection of taxes between India and Japan.
Revenue Secretary Hasmukh Adhia and Ambassador of Japan Kenji Hiramatsu signed the agreement on behalf of the two countries. Finance Ministry has said that the protocol provides for internationally accepted standards for effective exchange of information on tax matters, including bank information and information without domestic tax interest.
Further, it also allows for sharing of information received from Japan in respect of an Indian resident with other law enforcement agencies with authorisation of the competent authority of Japan and vice versa. As per the agreement, it is envisaged that both India and Japan will lend assistance to each other on collection of revenue claims. The protocol allows exemption of interest income from taxation in the source country with respect to debt claims insured by the government or government-owned financial institutions.