The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval forsigning of an Agreement between India and Maldives for the avoidance of double taxation of income from international air transport.

The Agreement provides for relief from double taxation for airline enterprises of India and Maldives by way of exemption of income derived by the enterprise of India from the operation of aircraft in international traffic, from Maldivian tax and vice-versa. Under the agreement, profits from the operation of aircraft in international traffic will be taxed in one country alone. Accordingly the taxing right is conferred upon the country to which the enterprise belongs. The Agreement will provide tax certainty for airline enterprises of India and Maldives.

The Agreement further provides for Mutual Agreement Procedure for resolving any difficulties or doubts arising as to the interpretation or application of the Agreement.

Double taxation relief for international air transport assigns exclusive taxing rights to the enterprise's residence country. Agreement establishes avoidance of double taxation for international air transport income by exempting an enterprise's income from operation of aircraft in international traffic from taxation in the other Contracting State, allocating taxing rights exclusively to the State of residence, and providing a Mutual Agreement Procedure to resolve interpretive or application disputes.