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Agreement on establishment of Strategic Partnership Council between India and Saudi Arabia



  • India-Saudi Strategic Partnership Councilwas formed to coordinate on strategically important issues. The council will be headed by the Prime Minister and Crown Prince Mohammed and will meet every two years.
    • India is the fourth country with which Saudi Arabia has formed such a strategic partnership,after the UK, France and China.
  • 12 Memorandum of Understandings (MoUs)on issues related to defence industries, security, air services, renewable energy, medicine products regulation, prevention of narcotics trafficking, and the use of RuPay cards in Saudi Arabia.
    • India also cleared an MoU that will help Hajj pilgrims to travel comfortably in Saudi Arabia during the pilgrimage seasons.
  • Stand on terrorism and other issues:
    • Both sides condemned terrorism in all forms and stated that no particular religion, race or culture should be linked with international terrorism.
    • Discussed a number of regional conflicts like the war in Syriaand Yemen and sought lasting peace in the Palestinian territories for the establishment of the independent Palestinian state based on the pre-1967 borders with “Jerusalem as its capital”.
  • Future Investment Initiative:
    • It is Saudi Arabia’s annual investment forum,also known as ‘Davos in the Desert’. The informal name derives from the World Economic Forum’s annual meeting that is held in Davos, Switzerland, where world leaders discuss and shape agendas for pressing international issues.
    • The Prime Minister of India also invited Saudi companies to invest in India’s energy sector as India has set a target of $100 billion investment in the sector by 2024.
  • Cooperation in the Energy Sector:
    • Saudi Arabia is keen to play a role in the creation of strategic petroleum reservesat Padur in Karnataka.
    • A study is being conducted for the setting up of the world’s largest greenfield refinery at Raigarh in Maharashtra by Saudi Aramco, Adnoc of the United Arab Emirates and Indian public sector oil companies.

India – Saudi Arabia Ties


  • Saudi Arabia is a strategic partner of Indiasince the signing of the Riyadh Declaration in 2010.
  • It is currently India’s second-largest supplier of crude oil– providing about 18 % of its energy needs. It also has a major role in India’s Strategic Petroleum Reserves (SPRs).
    • The largest supplier of crude oil is Iraq.
  • It is India’s 4thlargest trade partner. In 2018-19, the India-Saudi bilateral trade was the US $ 34.03 billion.
  • The 6 million-strong Indian community in Saudi Arabiais the largest expatriate community in the Kingdom and is the ‘most preferred community’ due to their expertise, sense of discipline, law-abiding and peace-loving nature.
  • Haj pilgrimage is another important component of bilateral relations.


Agreement and Protocol between India and Chile for the avoidance of double taxation


Purpose of the amendment of DTAA:


  • For the avoidance of double taxation.
  • For the prevention of fiscal evasion with respect to taxes on income.
Additional changes by signing the Protocol:


  • It updates the existing provisions for exchange of information to the latest international standards.
  • It incorporates changes required to implement treaty related minimum standards under the Action reports of Base Erosion & Profit Shifting (BEPS) Project, where India participated on an equal footing.
Legal Provision:


Under Section 90 of the Income-tax Act, 1961, India can enter into an agreement with a foreign country or specified territory for the avoidance of double taxation of income, for the exchange of information for the prevention of evasion.

Double Taxation Avoidance Agreement (DTAA):


It is referred as Tax Treaty, a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries.

A DTAA applies in cases where a tax-payer resides in one country and earns income in another.

DTAAs can either be comprehensive to cover all sources of income or be limited to certain areas such as taxing of income from shipping, air transport, inheritance, etc.

India has DTAAs with more than eighty countries.

  • The DTAA will facilitate elimination of double taxation. Clear allocation of taxing rights between Contracting States through the Agreement will provide tax certainty to investors & businesses of both countries while augmenting the flow of investment through fixing of tax rates in source State on interest, royalties and fees for technical services. The Agreement and Protocol implements minimum standards and other recommendations of G-20 OECD Base Erosion Profit Shifting (BEPS) Project. Inclusion of Preamble Text, a Principal Purpose Test, a general anti-abuse provision in the Agreement along with a Simplified Limitation of Benefits Clause as per BEPS Project will result in curbing of tax planning strategies which exploit gaps and mismatches in tax rules.


Cabinet approves extension of the term and coverage of the Fifteenth Finance Commission 


Article 280 of the Indian Constitution


  • President after two years of the commencement of Indian Constitution and thereafter every 5 years, has to constitute a Finance Commission.
  • It shall be the duty of the Commission to make recommendations to the President in relation to the:
    • the distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them and the allocation between the States of the respective shares of such proceeds;
    • the principles which should govern the grants in aid of the revenues of the States out of the Consolidated Fund of India;
    • any other matter referred to the Commission by the President in the interests of sound finance
    • The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them

Note: President can also constitute Finance Commission before the expiry of five years as he considers necessary

Article 281 of the Indian Constitution


  • It is related to the recommendations of the Finance Commission:
    • The President has to lay the recommendation made by Finance Commission and its explanatory memorandum before each house of Parliament

To read more on important articles of Indian Constitution, you may check the linked article.

Who Constitutes Finance Commission of India?

President of India constitutes the Finance Commission every five years or on time considered necessary by him.

What is composition of Finance Commission of India?


Finance Commission Chairman and Members
  • Chairman: Heads the Commission and presides over the activities. He should have had public affairs experience.
  • One Secretary and four Members.
  • The Parliament determines legally the qualifications of the members of the Commission and their selection methods.
Qualifications of Finance Commission Chairman and Members
  • The 4 members should be or have been qualified as High Court judges, or be knowledgeable in finance or experienced in financial matters and are in administration, or possess knowledge in economics.
  • All the appointments are made by the President of the country.
  • Grounds of disqualification of members:
  • found to be of unsound mind, involved in a vile act, if there is a conflict of interest
  • The tenure of the office of the Member of the Finance Commission is specified by the President of India and in some cases, the members are also re-appointed.
  • The members shall give part-time or service to the Commission as scheduled by the President.
  • The salary of the members is as per the provisions laid down by the Constitution.

What are functions of Finance Commission of India?


Functions of Finance Commission


The Finance Commission makes recommendations to the president of India on the following issues:

  • The net tax proceeds distribution to be divided between the Centre and the states, and the allocation of the same between states.
  • The principles governing the grants-in-aid to the states by the Centre out of the consolidated fund of India.
  • The steps required to extend the consolidated fund of a state to boost the resources of the panchayats and the municipalities of the state on the basis of the recommendations made by the state Finance Commission.
  • Any other matter referred to it by the president in the interests of sound finance.
  • The Commission decides the basis for sharing the divisible taxes by the centre and the states and the principles that govern the grants-in-aid to the states every five years.
  • Any matter in the interest of sound finance may be referred to the Commission by the President.
  • The Commission’s recommendations along with an explanatory memorandum with regard to the actions done by the government on them are laid before the Houses of the Parliament.
  • The FC evaluates the rise in the Consolidated Fund of a state in order to affix the resources of the state Panchayats and Municipalities.
  • The FC has sufficient powers to exercise its functions within its activity domain.
  • As per the Code of Civil Procedure 1908, the FC has all the powers of a Civil Court. It can call witnesses, ask for the production of a public document or record from any office or court.
Advisory Role of Finance Commission


The recommendations made by the Finance Commission are of an advisory nature only and therefore, not binding upon the government. It is up to the Government to implement its recommendations on granting money to the states. To put it in other words, ‘It is nowhere laid down in the Constitution that the recommendations of the commission shall be binding upon the Government of India or that it would amount to a legal right favouring the recipient states to receive the money recommended to be provided to them by the Commission.