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Relief from double taxation - 90/90a or 91

S Das (Finance Professional) (59 Points)

09 March 2015

Dear Experts,

My query is on filing ITR-2 with relief from double taxation for part-year income from USA for AY2014-15 (assessee India resident for tax purpose for this AY)-

1. Can s/he choose to apply relief u/s 90/90A (DTAA) or u/s 91 (Income tax act), whichever is more benefitial, even though DTAA exists between India and USA? Some articles cite different hearings (e.g. Reference :Tata Sons Limited vs. DCIT (ITAT No: 4978/Mum/04)) but do not find a concrete mention anywhere in Govt website.

2. It is understood FTC u/s 90 DTAA only allow credit for Federal income tax (and no other tax components like state, SSN, medicare). Which of these tax components are allowed u/s 91?

Thank you in advance.

Regards,

S.Das

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9 Replies

J. K. Ratan (Compliance Advisor) (794 Points)
Replied 09 March 2015

Dear Sir

Indian Goverment has bilateral DTAA Agreement with USA.

You could enjoy the benefit of DTAA under Section 90 of income tax act for Tax paid on your Income in USA (Federal Income Tax paid Only).

2 Like

S Das (Finance Professional) (59 Points)
Replied 09 March 2015

Dear Jay,

Thank you for the promt response. I also wanted to confirm if the assesse really can choose between 90/90A or 91 based on whichever is more benefitial for him/her (though DTAA exists between India and USA and 90/90A should be generally applicable). Please refer this article- https://www.taxdost.com/state-income-taxes-in-the-usa-and-canada-are-eligible-for-foreign-tax-credit-under-section-91-of-the-income-tax-act-despite-dtaa-allows-only-federal-tax/#comment-12489

My understanding is since 91 will allow credit for both federal and state taxes, applying u/s 91 will be generally more benefitial for people who just received salary.

Regards

S.Das

J. K. Ratan (Compliance Advisor) (794 Points)
Replied 09 March 2015

Dear Sir

Section 91 of Income tax Act 1961 is applicable only When Indian Govt. don't have any DTAA agreement with foreign Treaty.

When you already fall under section 90 of Income tax act 1961, can't exercise the benefit of Section 91.

1 Like

S Das (Finance Professional) (59 Points)
Replied 09 March 2015

Hi,

Thanks again. The article says- https://www.taxdost.com/state-income-taxes-in-the-usa-and-canada-are-eligible-for-foreign-tax-credit-under-section-91-of-the-income-tax-act-despite-dtaa-allows-only-federal-tax/#comment-12489

The Mumbai bench of Income-tax Appellate Tribunal (the Tribunal) in this case held that US federal tax and state tax paid in respect of income earned overseas are not deductible as expenditure incurred for earning income under section 37 of the Income-tax Act, 1961 (the Act). Further, the Tribunal observed that, though relief is not available for state income taxes paid under the India- US tax treaty (tax treaty), the relief is available under Section 91 read with Section 90 of the Act.

Is this incorrect then?

Regards,

S.Das

J. K. Ratan (Compliance Advisor) (794 Points)
Replied 09 March 2015

Dear Sir

Kindly Go through the DTAA Agreement With USA. Click on following URL..

https://www.incometaxindia.gov.in/Pages/international-taxation/dtaa.aspx

B (Others) (32 Points)
Replied 18 August 2015

Hello,

On the same lines if any country does not have DTAA with India,then also will there be a relief for the tax paid in the foreign country.

My question is specific to Luxembourg where there was no DTAA with India from Jan - Mar 2009(if Iam correct).In that case how the relief should be calculated while declaring global income in India

THanks