Assessee having income from inia & uk for the a.y.2019-20 for 7 months & 5 months respectively.

An asssessee reside India more than 7 months in a year as status Resident India and 5 months stayed in abroad i.e. UK for professional service as a Doctor for the A.Y.2019-20. In the tenure stayed in UK for 5 month Income Tax to be paid and filed return separately under UK Income Tax Act.

Now, as per Income Tax Act in India for the A.Y.2019-20 how assessee calculate taxable income In india merged with UK income and also tax paid in UK currency. Please guide me.

Replies (1)

India had comprehensive D.T.A.A with the U.K by virtue of Notification No. GSR 91(E), dated 11-2-1994 (Latest and in force. The previous notification was in the year 1956). It seems that D.T.A.A between India - U.K is based on U.N Model convention as it includes an Article-15: INDEPENDENT PERSONAL SERVICES (Absent in both O.E.C.D and U.S Model tax conventions).  Since India had D.T.A.A with the U.K, India has to sanction the allowance under  Article-24: ELIMINATION OF DOUBLE TAXATION (Article number based on D.T.A.A b/w India and U.K - Generally, Article-23 deals with such issue in Model tax conventions) to avoid Jurisdictional double taxation. Allowance may be based on Exemption method or Credit method.

In the given case, Article-24(2) of D.T.A.A b/w India & U.K provides for Credit method to eliminate Double taxation. It provides for Credit of tax paid in the U.K against Income tax payable. Foreign Tax Credit (FTC) shall be lower of a) Tax paid in the U.K or b) Income tax payable (Tax on total income which includes foreign income also and computed accordingly as per IT Act,1961) x Foreign Income / Total income computed under IT Act.

To compute foreign tax credit under Article-24(2), tax paid in the U.K would be converted into INR based on Telegraphic Transfer Buying rate of S.B.I on last date of the month immediately preceding the month in which tax paid or deducted. For example, If assessee paid tax in the U.K on 10-05-2019 then relevant T.T Buying rate for conversion would be S.B.I T.T buying rate as on 30-04-2019 (being previous month is April-2019) - Rule no 128 inserted by virtue of Notification No. 54/2016 dated 27 June 2016 prescribes the same.

 

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