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Can One Claim Relief For Tax Paid In A Country With Which In

Rahul Gupta (CA Final Student) (1780 Points)

19 March 2008  

Sunday, March 16, 2008

Can One Claim Relief For Tax Paid In A Country With Which India Has No DTAA?

I worked in Hongkong for the period of 1/4/2007 to 30/6/2007 on Salary basis in a company. I was transferred in India in July 2007 in a branch of the same company, when i left Hongkong in July 2007 the Income Taxes is paid by me to the Government of Hong Kong. Now i wanted to file my return for the Financial Year 2007-08.Is their is any DTAA's of India with Hong Kong, if yes, how my tax liability will be calculated ?Is there any benefit will be available to me in respect of taxes paid by me in HongKong ? Is Hongkong is Part of China for DTAA's point of view ? In new form of the return thier is no column for showing DTAA's then how I should file my Return ?

Your salary earned in Hongkong is definitely taxable in India and India has no treaty with Hong Kong for avoidance of double taxation. I presume , you were out of country for six months only ,you are resident in India .Still , you should not worry because Indian Income Tax Act has provisions of relief from double taxation of income even in cases where income is earned and taxed in a country with which India has no formal "Double Taxation Avoidance Agreement".

Section 91 of the I T Act provides relief from double taxation in such type of cases which is given as under :
91(1) If any person who is resident in India in any previous year proves that, in respect of his income which accrued or arose during that previous year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal

The general rule of computation of relief is as under:
  1. Ascertain doubly taxed income .
  2. Ascertain tax by applying Indian rate of tax as well as rate of foreign country separately.
  3. Which ever is less , relief is given to that extent.

Certain other points need your attention are :

  • Doubly taxed income has not been defined ,but as expressed in a court decision by Bombay High Court in CIT v. Bombay Burmah Trading Corpn. Ltd. [2003] 259 ITR 423 , it means only that portion of income on which tax has been paid by the Resident in India which was subjected to taxation abroad also.
  • As per explanation given under Section of the I T Act ,the expression "Indian rate of tax" means the rate determined by dividing the amount of Indian income-tax after deduction of any relief due under the provisions of this Act but before deduction of any relief due under this Chapter , by the total income;
Where in Return Can You Claim DTAA?
In income tax returns , there is definitely fields for claiming relief from DTAA.You will find field for claiming relief u/s 90 or 91 after the field for claiming relief u/s 89 of the I T Act. Compute the relief , and claim that much amount in those column.

 2 Replies

Darshu (CA) (1580 Points)
Replied 20 March 2008

Good info............

Aparna (CA Final student) (49 Points)
Replied 20 March 2008

can anyone give the list of countries with whome India has DTAA


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