Kathmandu: India and Nepal on Sunday signed a revised Double Taxation Avoidance Agreement (DTAA), which will facilitate exchange of banking and tax information and sharing it with law enforcement agencies.
"The revised DTAA provides for internationally accepted standards, including sharing of bank information," India's Finance Minister Pranab Mukherjee said in a joint press conference with Nepalese conterpart Barshaman Pun.
He said as per the DTAA, the two countries will also share information on taxation which, however, will not hamper their respective domestic interests.
"Further, the information received can be shared with other law enforcement agencies with the consent of the information supplying country," he added.
The revised tax treaty will replace an earlier agreement signed between the two countries in 1987. The earlier agreement with Nepal did not provide for the sharing of banking information.
"The revised DTAA will provide stability to the residents of India and Nepal and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Nepal," Mukherjee said.
The tax treaties, he said, were being modified in line with agreement reached at the G-20 meetings of global leaders.
The revised DTAA would also help in assessment of taxes and one-time payment in the source or destination country whenever necessary. Further, the threshold withholding tax rates on dividends, interest, have been rationalised as per international taxation requirements.
India and Nepal were supposed to sign the revised DTAA during Nepalese Prime Minister Baburam Bhattarai India visit in October but it was postponed due to some technical reasons.

He said the provisions in the DTAA would entail effective exchange of information, assistance in collection of taxes between tax authorities and the anti-abuse provisions.
"This would ensure that the benefits of the agreement are availed of by the genuine residents and not misused by third country residents," Mukherjee added.
Commenting on Nepal's demand for abolition of additional customs duty on more items, he said Commerce Secretaries of both the countries would be meeting next month.
"Nepal wanted India to abolish additional customs duty on 217 items. India has already agreed to abolish additional customs duty on 117 items. Decision on 100 items will be taken soon," Mukherjee said, adding both the countries have agreed to review the bilateral relations.
"We have also sought preliminary inputs from Nepal by the Foreign Secretary. We have agreed that bilateral joint commission should be convened at an early date to review the entire gamut of the bilateral relationship, including the requests from Nepal for Indian assistance for implementation of priority development projects," he said.
The agreement is also likely to boost confidence of investors and help Nepal attract more investment from India, experts said.
India is the biggest source of foreign investments in Nepal, as also its largest trading partner. However, Nepal accounts for only 0.44 percent of India's total trade.
The bilateral trade between the two nations has increased 37 percent to around USD 2.70 billion in 2010-11 fiscal.
Indian firms are the biggest investors in Nepal accounting for about 47.5 percent of total approved foreign direct investments.
India has signed such DTAA with 81 countries and Tax Information Exchange Agreements (TIEAs) with 5 jurisdictions. It has concluded negotiations with 17 jurisdictions for signing of TIEA.