The Double Tax Avoidance Agreement (DTAA) is essentially a bilateral agreement entered into between two countries, in this case, between India and another foreign state like the UK. The basic objective is to avoid, taxation of income in both the countries (i.e. Double taxation of same income) and to promote and foster economic trade and investment between two countries.
The Non-Resident can certainly take the benefit of the provisions of DTAA entered into between India and the country, in which he resides, more particularly in respect of Interest Income from NRO account, Government securities, Loans, Fixed Deposits with Companies etc.
Currently, Interest on NRO FD is
subject to a tax deduction at source at the rate of 30.9% if DTAA benefit is not allowed. There are different beneficial lower rate of tax on Interest prescribed for different countries which range
from 10% to 15%.