India-Korea new DTAA to tax Capital Gains at Source

India's revised double taxation avoidance agreement (DTAA) with South Korea, under which capital gains tax will be levied at the source with effect from April 1, 2017, has come into force from September 16, on being notified, an official statement said on Wednesday.

"A new revised DTAA between India and Korea for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income was signed on 18th May 2015.

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"It has now come into force on 12th September 2016, on completion of procedural requirements by both countries. Provisions of the new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017," said a Finance Ministry statement.

The existing pact provides for residence-based taxation of capital gains on shares.

"The existing DTAA provided for residence-based taxation of capital gains on shares. In line with India's policy of taxation of capital gains on shares, the revised DTAA provides for source-based taxation of capital gains arising from alienation of shares comprising more than 5 per cent of share capital," the statement said.