The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval for revising the Double Taxation Avoidance Convention (DTAC) which was signed in 1985, between India and the Republic of Korea, for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income.

 The revised Double Taxation Avoidance Agreement (DTAA) will provide tax stability to the residents of India and Korea and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries.

 The revised DTAA provides for source based taxation of capital gains, provisions for making adjustments to profits of associated enterprises on the basis of arm's length principle, provides for residence based taxation of shipping income, provisions for service of permanent establishment, rationalizes tax rates in the Articles on Dividends, Interest and Royalties and Fees for Technical Services.

 The Agreement further incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities and also incorporates limitation of benefits provisions, to ensure that the benefits of the Agreement are availed of by genuine residents of both countries.

Double taxation avoidance: revised treaty reallocates taxing rights and strengthens information exchange and anti abuse safeguards. The revised bilateral tax Agreement reallocates taxing rights by providing source based taxation of capital gains, residence based taxation of shipping income, service related permanent establishment rules, profit adjustments for associated enterprises under the arm's length principle, and rationalised treatment of Dividends, Interest, Royalties and Fees for Technical Services, while adding provisions for effective exchange of information, assistance in tax collection and a limitation of benefits clause to restrict treaty access to genuine residents.