Mukherjee said India welcomes the seven-point agreement and still has an interest in “successful Nepal`s transition to multi-party democracy and completing the peace process”. “India is committed to supporting the Government and people of Nepal in these processes of historic change in Nepal.” India and Nepal signed a revised double taxation (DBA) convention on 27 November 2011. This will help prevent tax evasion and facilitate the exchange of information on the banking sector between the two countries. DTAA will allow Indian traders and investors to take advantage of tax breaks in India as soon as they pay taxes in Nepal. The deal is also expected to boost investor confidence and help Nepal attract more investment from India. Given the growth in trade and investment between Nepal and Bangladesh in recent years, the government expects the tax deal to be a milestone in promoting economic relations between the two countries, which should also attract investment from Bangladeshi investors. While Nepalese law prevents its citizens from investing in other countries, the DTAA should eliminate double taxation of Nepalese staff and students in Bangladesh. The pact comes shortly after the two countries signed the bilateral investment promotion and protection agreement (BIPPA) during Dr Bhattarai`s visit to India last month. Nepal hopes that the two agreements will jointly encourage new Indian investment in Nepal, which in turn would lead to an increase in exports and help close the growing trade gap with India.
India accounts for more than 45 per cent of foreign direct investment in Nepal, while two-thirds of Nepal`s trade is with India. 1. Nationals of a Contracting State may not be subject in the other Contracting State to any taxation or obligation related thereto, which is heavier or heavier than the charge and the requirement arising therefrom, to which the nationals of that other State are or may be subject in the same circumstances. 2. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State may not be levied in that other State at a price lower than that imposed on enterprises of that other State which carry on the same activities in the same circumstances. (3) This Article shall not be construed as requiring a Contracting State to grant allowances, reductions, reductions, reductions and deductions to all persons not resident in that State for tax purposes that are lawfully available only to resident persons. 4. Enterprises of a Contracting State in which all or part of the capital is owned or partly owned or controlled, directly or indirectly, by either Contracting State may not be subject in the first-mentioned Contracting State to any taxation or requirement which is other or more onerous than the taxation and related requirements to which other similar enterprises of that first-mentioned State are subject: are or may be subject to the same circumstances. .