Dividend paid out by a company in country A to a resident of country B could e taxed in both countries. Prior to 1st June 1997, a dividend, received by a shareholder from an Indian company was taxable in India. However, the DTAAs provide for a concessional rate of tax, e.g. 5% or 10%, as against the normal rate of tax of 25% under section 115A of the Income-tax Act. A resident of another contracting State, entitled to the receipts of a DTAA, was therefore entitled to opt for the lower rate of tax to be applied to him in the paying country. In India, with effect from 1st June 1997 to 31st March 2002 a tax on distribution of dividends is to be paid by the Company on distributing the dividends. No tax is levied by India on the recipient of the dividend. However, by virtue of the Finance Act 2002, dividend is again taxable in the hands of the recipient with effect from AY: 2003-2004 and therefore the taxability of dividend under the DTAA assumes significance.