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section 91 dtaa calculation

purvi (cgm) (24 Points)

14 September 2010

hi,

pls give me the steps for section 91 dtaa calculation..

would help if a practical example is also given with fictitious figures..

regards......

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12 Replies

Ankit Singla (B.Com (Hons.), CA) (88 Points)
Replied 16 September 2010

HI Purvi

Lets have an example

Mr.A is having income from INDIA of Rs.200000 and Rs.50000 from US. Tds has been deducted on his US income of Rs.5000

Calculation of relief u/s 91

Step 1 : Calculate tax liability on Rs.250000

for A/Y 2010-11 tax liability is Rs.9270

Step 2 : Calculate average tax on Rs.50000 US Income

9270*50000/250000 = Rs.1854

Step 3 : Calculate relief u/s 91

less of tax liability calculated in step 2 or tax paid in US

i.e. 1854 or 5000 whichever is less

Relief u/s 91 = Rs.1854

Step 4 : Calculation of Net tax liability

Tax liability calculated in step 1 less relief calculated in step 3

i.e.9270-1854 = Rs.7416

Note : Section 91 is applicable in case DTAA doesn't exist b/w the countries in which assessee has earned income.

I hope u r satisfied with the example

3 Like

Rajan (NA) (54 Points)
Replied 06 June 2011

Dear Ankit,

Can explain me your calculation for relief u/s. 91.

If I am right sec. 91 of Income Tax Act says:

IT Act Section 91. Countries with which no agreement exists

(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 income9 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.

(2) If any person who is resident in India in any previous year proves that in respect of his income which accrued or arose to him during that previous year in Pakistan he has paid in that country, by deduction or otherwise, tax payable to the Government under any law for the time being in force in that country relating to taxation of agricultural income, he shall be entitled to a deduction from the Indian income-tax payable by him—
(a) of the amount of the tax paid in Pakistan under any law aforesaid on such income which is liable to tax under this Act also; or
(b) of a sum calculated on that income at the Indian rate of tax; whichever is less.

(3) If any non-resident person is assessed on his share in the income of a registered firm assessed as resident in India in any previous year and such share includes any income accruing or arising outside India during that previous year (and which is not deemed to accrue or arise in India) in a country with which there is no agreement under section 90 for the relief or avoidance of double taxation and he proves that he has paid income-tax by deduction or otherwise under the law in force in that country in respect of the income so included he shall be entitled to a deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income so included 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.

Please explain how your illustration complies with the above provision?

Thanks and regards,

Sridhar

Originally posted by : Ankit Singla
	HI Purvi Lets have an example Mr.A is having income from INDIA of Rs.200000 and Rs.50000 from US. Tds has been deducted on his US income of Rs.5000 Calculation of relief u/s 91 Step 1 : Calculate tax liability on Rs.250000 for A/Y 2010-11 tax liability is Rs.9270 Step 2 : Calculate average tax on Rs.50000 US Income 9270*50000/250000 = Rs.1854 Step 3 : Calculate relief u/s 91 less of tax liability calculated in step 2 or tax paid in US i.e. 1854 or 5000 whichever is less Relief u/s 91 = Rs.1854 Step 4 : Calculation of Net tax liability Tax liability calculated in step 1 less relief calculated in step 3 i.e.9270-1854 = Rs.7416 Note : Section 91 is applicable in case DTAA doesn't exist b/w the countries in which assessee has earned income. I hope u r satisfied with the example

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7014 Points)
Replied 14 October 2011

Example given by Ankit Singla is correct.

Anuj

+91-9810106211

femaquery @ gmail.com

varathu.anuraj (Article) (32 Points)
Replied 26 July 2012

whether Education cess applicable for an assessee having an agreement of DTAA between india and USA. actually he gave the special rate at 15% directly. wat to do?

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7014 Points)
Replied 26 July 2012

No education cess is applicable on the rate of 15% . Howver you need to make sure that the foreign party has PAN otherwise the rate shall be 20%.

Anuj

femaquery @ gmail.com

CA Mangesh Chitale (B. Com. A.C.A. DISA (ICAI) DIRM (ICAI)) (245 Points)
Replied 03 September 2012

Dear Anuj Sir, how to calculate relief u/s 90. or is it same formula as per section 91?

nandita (CMA) (67 Points)
Replied 25 November 2014

sir

could u plz say calculation of relief u/s 90.am clear with sec 91.will u pls say me computation u/s 90.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 25 November 2014

Keeping bookmarked for knowledge sharing by experts.

Thanks

S Das (Finance Professional) (59 Points)
Replied 10 March 2015

Dear All,

I have a query, thanks in advance for sharing your views.

1. If an assessee has both India and USA salary and s/he is tax resident on India for AY2014-14, can you please confirm that s/he can choose to file ITR-2 under section 91 instead of 90/90A, in case that is "more benefitial" to him/her?

2. My general understanding is section 91 supports credit for all USA taxes paid (federal, state, SSN etc.), whereas DTAA would allow credit for only Federal tax.Is that correct? If this is true, for normal salary earnings in USA, generally 91 would turn out to be more beneficial /higher DTC relief (as state taxes are high). Or are there difference in calculation of relief u/s 91 from the above?

Regards.

Das

Bharath (Others) (23 Points)
Replied 25 August 2015

Hi All,

I am looking for similar information on DTAA, i have filed US tax as Resident (was there for only 3 months). Now to claim relief under 90A, the tax to be paid in india seems to be more than the federal tax paid in US. So is their a way to claim relief under sec 91.

thanks,

bharath

S Das (Finance Professional) (59 Points)
Replied 25 August 2015

Bharath,

Information is not very clear on this. However, I had found this information which seemed relevant in this context.

https://itatonline.org/archives/tata-sons-limited-vs-dcit-itat-mumbai-foreign-state-taxes-eligible-for-credit-us-91-despite-the-dtaa-restricting-credit-to-federal-taxes/

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/

Please let me know how to decide to do your filings for India IT.

regards,

Das

1 Like

Bharath (Others) (23 Points)
Replied 26 August 2015

Hello sir,

The second link - article is more clear, so it means we can claim tax relief of federal in 90A and State in 91. Am i right. if income tax dept does not agree, there would be penalty on revised returns right?

thanks,

bharath