Foreign tax credit – Part 2

Unilateral tax credit –

Section 91 of Income Tax Act, 1961 (‘Act’) enables its residents to avail unilateral tax credit for foreign taxes paid outside India in a country with which India has not signed any tax treaty. Following conditions are required to be satisfied by the for availing unilateral tax credit –

  • Person claiming credit must be resident in India for the said previous year
  • Income is from a source outside India. In other words, income shall not be deemed to accrue or arise in India
  • Tax has been paid in the foreign country << The taxpayer should be able to prove that he/ she has paid income tax on such income in the foreign country>>
  • Absence of agreement under section 90 for the relief or avoidance of double taxation.

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