Dtaa

This query is : Open

sanath (Querist)
Follow

06 August 2011 Hi, Pls clarify my ques on the foll 2 situations.

1) Indian resident earns salary income in UK(From a UK co).
And tax is also deducted there and there is a DTAA between both the countries. The Resident also earns income here(from an Indian company) and tax gets deducgted here too.

How is relief worked out under Sec 90 and 90A.

2) Assuming he is a non resident, how does the situation differ?

Thank You

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

06 August 2011 THIS REPLY MAY BE READ IN CONTEXT OF SECTION 91
WHERE THERE IS NO AGREEMENT EXISTS.
FOR REPLY OF SECTION 90 PLEASE REFER MY REPLY DATED
07/08/2011 BELOW.

Reply 1-

1. In this case in Total Income (Indian), the salary Income of UK will be added and TAX on this INCOME will be calculated.

2. CALCULATION OF AVG TAX RATE (RI)
.
RI=(TAX on INCOME/INCOME)x 100

3. If Tax on UK salary is at higher rate,
credit of such excess will not be given.
Credit will be given @RI only.

In this case you can directly calculate tax on Indian Income as under
Indian Income x RI

4. However, where UK Rate is lower
Credit will be given at such lower rate only. CREDIT WILL BE TAKEN AS UNDER
TAX-TaxUK= Net Tax payable.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

06 August 2011 2) Assuming he is a non resident, how does the situation differ?

REPLY- IN THIS CASE INDIAN INCOME ONLY WILL BE TAXABLE
.
AND
.
TAX CREDIT OR INCOME OF UK INCOME WILL NOT BE CONSIDERED AT ALL.

Message likes : 1 times

sanath

sanath (Querist)
Follow

07 August 2011 Mr.Paras, Appreciate your reply.

His Indian taxable income is Rs.2.85 Lacs.
And his UK Income is Rs.16.1 Lacs.

Hence adding both and finding out the tax payable comes to Rs.4.33 Lacs.

Avg Rate = (4.33/18.95) Lacs * 100 = 22.86%

Avg rate of tax of UK Income is 13.5%

Hence relief = His UK Taxable Income * 13.5% is what you are saying, If I am not wrong.

Now, how is this treatment different from whats given in Sec 91, where tax is calculated when there's no DTAA between the contracting states?

Thank You

Message likes : 1 times

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

07 August 2011 Thank you Sanat for appreciating my efforts as well as enriching my knowledge also in this matter. I feel that your query is
pointing out towards the right direction, and I am modifying my REPLY-1-in Bold letters, so as to avoid confusion at a later stage to any of our members.

sanath

sanath (Querist)
Follow

07 August 2011 Right, proceed sir.

sanath

sanath (Querist)
Follow

07 August 2011 Awaiting your reply sir

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

07 August 2011 How is relief worked out under Sec 90 and 90A?

Mr. Sanath,

Section 90(2) provides that , where ever treaty exists, the provision would apply
to the extent they are more beneficial to the assessee. In this case as the assessee has already paid tax in UK even at a lesser rate, his relief will be maintained at 22.86% being more beneficial to him . However, he will have to pay tax on Indian Income @22.86% only.

I appreciate, your response in this matter.

sanath

sanath (Querist)
Follow

07 August 2011 I dont get you sir.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

07 August 2011 If the same case is covered U/s 91, where no treaty exists with India-

TAX PAYABLE .................. 4,33,000
LESS: RELIEF @ 13.5% ON 16.1LAC 2,17,350
................................. ----------
Net Tax Payable 215650

sanath

sanath (Querist)
Follow

07 August 2011 How do you work out under sec 90/90A sir.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

07 August 2011 1. In this case in Total Income (Indian), the salary Income of UK will be added and TAX on this INCOME will be calculated.

2. CALCULATION OF AVG TAX RATE (RI)
.
RI=(TAX on INCOME/INCOME)x 100

3. If Tax on UK salary is at higher rate,
credit of such excess will not be given.
Credit will be given @RI only.

In this case you can directly calculate tax on Indian Income as under
Indian Income x RI
285000x22.86% will be tax payable.

sanath

sanath (Querist)
Follow

07 August 2011 Right,

What happens when Foreign income gets taxed at a rate lower than Indian Income.

ie:-
RI = 22.5%
UK Tax rate - 13.5%

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

Mahesh Balanthimugaru

VIJAY M DHANAK

CA Uzma Khan

Suvigya Tiwari

Sunder Sadani

Subscribe Now

Dtaa

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Accountant

GST CONSULTANCY

Senior Executive

GST CONSULTANT

Manager- Finance and Compliance

CA Final