KATHMANDU / NEW DELHI: More than a month after they sealed a bilateral investment pact, India and Nepal Sunday took another key step to boost their economic ties by signing a revised Double Taxation Avoidance Agreement (DTAA).
Finance Minister Pranab Mukherjee and his Nepalese counterpart Barshaman Pun signed the revised tax treaty, which will replace the 1987 treaty, in the Nepalese capital.
The agreement, among other things, will facilitate exchange of information on banking between the two countries and will exempt Indian investors and traders from paying tax in India once they pay taxes in Nepal.
"I am confident that this mechanism will strengthen and deepen our bilateral relations, and we would be in a position to move forward and expand our trade and other economic activities," said Mukherjee.
"The agreement reflects the international environment, which is prevalent today and the old agreement needs to be amended," Mukherjee added.
When Nepal's Prime Minister Baburam Bhattarai visited India last month, the two sided signed Bilateral Investment Protection and Promotion Agreement, but could not sign the double tax pact due to some differences over some clauses in the proposed revised treaty.
The taxation treaty issue also figured in talks between Prime Minister Manmohan Singh and Bhattrai when met in the Maldives on the margins of the SAARC summit early this month.
India is the largest source of foreign investments in Nepal and the bilateral trade between the two countries is estimated to be $2.7 billion in 2010-11.