Tax

1041 (DTAA) How to claim Double Tax relief under section 91 (absence of DTAA )

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• published: 21 Aug 2014
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890 (Income tax) How to claim Double Tax relief under section 91 (absence of DTAA )? Narration - By Amlan Dutta Video Link - https://www.youtube.com/watch?v=KBtVz-kWylM Project - Make Knowledge Free . The sections 90 and 91 of the income tax act cover this subject ! This is to prevent double tax incidence which happens on the tax payer due to tax being applied both due to residency and source rule For example, in India where taxation is based on residency,all income be it domestic or Global income is included in scope of total income .So , a Indian resident is expected to pay tax on both Indian and Global income Let’s understand this with a example , Say for previous year 2013 14 , I work in india with Indian company - BHEL from April to December and derive salary income 20 lacs here From January to March 2014 , I go to Canada and derive professional income there by playing a few matches and earn 10 lacs professional fees there I see ESPN sports agency(Toronoto /Canada) deducts TDS @ 3 lacs from my professional rereceipts on source So , tax rate = (300000/1000000) x 100 = 30 % Now, for filing return of income in India , being a resident , I have to consider income received in Canada as well in the scope of my gross total income So , my gross total income becomes 30 lacs Being a individual , I can take advantage of section 80 deductions (80 C to 80 U )listed in chapter VI A of the income tax act I have invested in Life insurance 1 lac rs which is less than 10 % of sum assured , so I can claim this much deduction benefit ( I have no other investments ) So, my total income now becomes 29 lacs subject to tax as per income slabs (0 – 2lacs – Nil – 2-5 lacs 10 % - 30,000 Rs , 5-10 lacs – 20 % - 1 lac and above 10 lacs – 30 % - 570000 Rs )…so Total tax payable is 700000 (7 lacs ) plus education cess i.e @ 3 % 21000 So , total tax payable = 721000 Tax rate for India = (721000/ total income ) x 100 = 24.8 % Think you have got 50 marks in maths paper of 100 , how do you remove percent ..you do 50 /100 x 100 …same you will do for tax rate …i.e divide taxes computed / total income …so you understand what is the rate of tax for Indian income Now as a tax payer , I am burdened by paying taxes twice on my foreign income So , in a globalised world where incidences of travelling to foreign countries to earn income is rather commonplace , the govt to prevent incidences of double taxation has enetered into bilatertal agreement with the members of the united nations so taxpayers can get relief Of the 192 nations , India has signed agreement with 82 nations like UK , austraia etc etc Here, sections 90 /90 A and relevant articles define the tax treatment to be pursued when taxpayer is subject to double taxation In absence of such agreement , section 91 is to be followed where taxpayer gets relief of lower of tax rates on doubly taxed income and if tax rates are equal , then relief of tax rate on doubly taxed income will be given In cited example,lets assume for a moment that bilateral agreement doesn’t exist between India and Canada. Now we will then follow section 91 and compare tax rates We see comparing tax rates ,i.e Indian tax rate of 24.8 % and Canadian tax rate of 30 % that tax rate of India is lower , So relief is of the amount arrived at applying this tax rate of the income which is subjected to double taxation i.e 10 lacs which is subject to both Canadian tax and Indian tax So, tax relief = Tax rate of india on doubly taxed income at Canada = 0.248 x 10 lcs = 248000 So , now tax payable = tax computed – relief = 721000 – 248000 = 473000 + Penal interest if applicable u/s 234 A/B/C We see in our tutorial , how this entire thing is represented through return The schedules FSI (foreign source income ), TR (tax relief ) and FA (Foreign assets )carry paramount significance ! Already , I see that on Indian salary income , some TDS has been done I pay the balance due taxes using challan 280 i.e self assessment tax and fill schedule IT Rest process remains same ! Please spread and share knowledge as much as you can !