Baroda branch, WIRC
Challenge Us
Foreign tax credit
Kalpesh Desai
Partner, BMR Advisors
November 2013
Contents
Introduction
Types of Relief

Unilateral relief

Bilateral relief
Double non-taxation
Excess foreign tax credit
Documentation
Cases where foreign tax credit not available
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Direct Tax Code
Practical issues in foreign tax credit
Case studies
Foreign tax credit | 3
Introduction
What is Foreign Tax Credit?
Foreign tax credit (‘FTC’) – Method for elimination of double taxation
Credit for the taxes paid in the source country against the taxes to be discharged in
the residence country
Income tax systems that tax residents on worldwide income generally offer FTC to
mitigate the potential for double taxation of income
For a tax payer to be eligible for FTC, the tax payer must have
 made a payment to a foreign government, and
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 the payment must be towards an income tax, or a tax in lieu of an income tax
Foreign tax credit | 5
Concept of double taxation
Jurisdictional double taxation - One and the same person is taxed on the same
income in more than one state. This may happen for one of the following reasons:
 Residence in one state and source in another state
 Triangular taxation
Economic Double taxation - Two separate persons are taxed on the same income
in more than one state
 Foreign income taxed in the hand of overseas company distributing dividend and dividend
 Taxation in source country in the hands of a partnership entity whereas in the residence
county, partners of such partnership are taxable
Foreign tax credit | 6
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taxed in the hands of shareholder
Elimination of double taxation
Countries often provide their residents with relief from double taxation through their
domestic tax laws – Chapter IX of the Income-tax Act, 1961 (‘the Act’)
Double Taxation Avoidance Agreements (‘DTAAs’) also contain articles for the
elimination of double taxation
Relief via DTAAs may be more generous than the domestic tax laws
Relief entrenched in the DTAA also restricts a country’s ability to amend unilaterally
the double tax relief provisions in its domestic law to the detriment of tax payers
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Residence State to provide the relief – Residence as per Article 4
Allocation of Right to Tax

Renunciation of right to tax by either state (Dependant services)

Sharing of rights (Resident state will provide Relief)
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Types of Relief
Types of Relief
Under Section 91 of
the Act
Under Section 90 of the
Act
Applicable where
DTAA does not exists
Applicable where
DTAA exists
Unilateral relief
Bilateral relief
When the domestic tax system
of a state provides relief for
double taxation irrespective of
whether the other state’s tax
system provides corresponding
relief or not
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Types of Relief
Two states negotiate an
agreement for providing
double taxation relief,
such relief is provided
through a DTAA
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Unilateral relief – Illustration
Particulars
Case I
Case II
Assumptions
(INR)
(INR)
Income in India
150,000
150,000
Income in foreign country
100,000
100,000
Global income
250,000
250,000
Tax rate in India
30%
30%
Tax rate in foreign state
25%
35%
Income tax on global income
(A)
75,000
75,000
Indian tax on foreign income
(B)
30,000
30,000
Foreign tax on foreign income
(C)
25,000
35,000
Unilateral tax relief as per the Act – Lower of (B) or (C)
(D)
25,000
30,000
Tax payable in India (A) – (D)
(E)
50,000
45,000
75,000
80,000
30%
32%
Total tax outflow (B) + (E)
Effective global tax rate
Foreign tax credit | 10
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Workings
Bilateral Relief – Methods
Methods
Exemption
Exemption with
progression
Full credit
Ordinary
Credit
Tax
sparing
Underlying
tax credit
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Full exemption
Credit
Exemption Method
Exemption method
(1/3)
Under this method, the residence country exempts the income arising in the source
country
Income would be chargeable to tax only in the source country
Generally preferred in DTAAs between a developed country and developing country,
as the developed country would generally be exporting capital and technology to
developing country
Two variants –
Full exemption – The residence country fully exempts the income earned by its resident in
the source country. Accordingly the capital / technology exporter would not be required to
pay tax on such income which would make it attractive for the exporter to export capital/
technology to the source country (eg Article XVII of India – Greece DTAA)

Exemption with progression – The residence country exempts the source country income
but the exempt income is considered for determining the tax on the non-exempt income (eg
Article 23 of India – Austria DTAA)
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
Exemption method
(2/3)
Exemption method - concerns

Reduces the tax share of resident state

Encourages use of low-tax countries as source state

May result in Double non-taxation (explained later) where source country exempts such
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income
Foreign tax credit | 14
Exemption method
Particulars
Assumptions
(3/3)
Full exemption
Exemption with
progression
(INR)
(INR)
Income in State R (Residence country)
60,000
60,000
Income in State S (Source country)
40,000
40,000
100,000
100,000
Rate of tax in State R
- for income up to Rs 80,000
- for income exceeding Rs 80,000 (on entire income)
25%
35%
25%
35%
Tax rate in State S
20%
20%
Tax payable in State R
60,000*25% = 15,000
60,000*35% = 21,000^
Tax payable in State S
40,000*20% = 8,000
40,000*20% = 8,000
23,000
29,000
23%
29%
Aggregate taxable income in State R
Aggregate tax
Tax on aggregate income
^The exempt income has been included for the purpose of ascertaining the applicable rate of tax (ie 60,000 + 40,000 = 100,000).
Hence, the applicable tax rate will be 35%
Exemption with progression - Level of foreign source income is relevant
Foreign tax credit | 15
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Workings
Credit Method
Credit method
(1/7)
Under this method, the residence country exempts the taxes paid in the source country
For the residence country, the loss of revenue is generally lower in credit method,
therefore generally most DTAAs relieve double taxation only through credit method
Non-refundable tax credit – In case the tax payable in Resident state is less than the
credit available or the relevant income is exempt in Resident state, the resident would
never get refund of the excess credit for the taxes paid in Source state

Full credit – Resident state grants credit for the taxes paid in the Source State without any restriction

Ordinary credit – Tax credit is restricted to lower of the taxes to be paid in the Resident state or the
actual taxes discharged in the Source state

Tax sparing – Income exempt in the Source state. However such income is taxable in the Resident
state for which the resident state provides for deemed tax exemption or deemed tax credit

Underlying tax credit – Mechanism to eliminate a form of ‘economic double taxation’
Foreign tax credit | 17
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Four variants
Full credit
(2/7)
Under this method, the residence country exempts the taxes paid in the source
country
OECD Model Convention
Particulars
Case I
Case II
Amount in INR
Amount in INR
Income in State R
80,000
80,000
Income in State S
20,000
20,000
100,000
100,000
Tax rate in State R
35%
35%
Tax rate in State S
20%
40%
Assumptions
Aggregate taxable income in State R
Workings
Tax payable in State R
(A)
35,000
35,000
Tax payable in State S
(B)
4,000
8,000
Total tax credit (credit for full taxes paid) (C) = (B)
(C)
4,000
8,000
Total tax after relief – (A) – (C)
(D)
31,000
27,000
Foreign tax credit | 18
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Article 23 of India – Namibia DTAA
Ordinary credit
(3/7)
Under this method, tax credit is restricted to lower of

The taxes to be paid in the Resident state; or

The actual taxes discharged in the Source state
Particulars
Assumptions
Case I
Case II
Amount in INR
Amount in INR
Income in State R
80,000
80,000
Income in State S
20,000
20,000
100,000
100,000
Tax rate in State R
35%
35%
Tax rate in State S
20%
40%
Aggregate taxable income in State R
Workings
Tax payable in State R
(A)
35,000
35,000
Tax payable in State S
(B)
4,000
8,000
Taxes in Resident state on income from Source state^
(C)
7,000
7,000
Total tax credit - Lower of (B) & (C)
(D)
4,000
7,000
Total tax after relief – (A) – (D)
(E)
31,000
28,000
^ 20,000 * 35 % = 7,000
Foreign tax credit | 19
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Article 25 of India – USA DTAA
Tax sparing credit
(4/7)
Income is taxable in the Resident state but it provides for deemed tax exemption or
deemed tax credit of taxes so exempted by the Source state
Domestic tax laws of countries generally do not provide for tax sparing credit
Article 25 of India – Singapore DTAA
Generally attached to income like dividend, interest, royalties, foreign branch /
permanent establishment income
However, concept of tax sparing credit leads to double non-taxation (explained
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later)
Foreign tax credit | 20
Tax sparing credit
(5/7)
Particulars
Tax sparing –
Absent
Tax sparing –
Present
Assumptions
Amount in INR
Amount in INR
Income in State R
80,000
80,000
Income in State S
20,000
20,000
100,000
100,000
Tax rate in State R
35%
35%
Tax rate in State S (exempted 30%)
- normal rate
- special rate
30%
0%
30%
0%
Aggregate taxable income in State R
Workings
Tax payable in State R
(A)
35,000
35,000
Tax payable in State S
(B)
-
-
Tax credit (tax charged in State S)
(C)
-
-
Tax credit (tax exempted in State S) ^
(D)
-
6,000
Total tax credit (C) + (D)
(E)
-
6,000
Total tax after relief – (A) – (E)
(F)
35,000
29,000
^ 20,000* 30 % = 6,000
Foreign tax credit | 21
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Tax sparing credit - Illustration
Underlying tax credit
(6/7)
A mechanism to eliminate a form of ‘economic double taxation’
Attached to dividend income; available only to a company
Credit is granted by Resident state not only for the taxes withheld on dividends but
also for the corporate taxes paid on the underlying profits out of which dividends has
been paid
Intended to mitigate the double taxation of corporate profits, which are taxed firstly
dividends paid by the company)
Requirement of substantial shareholding
Illustratively the following Tax treaties provide for tax credit –

Article 24 of India – UK DTAA

Comparison between Article 23 of India – Mauritius DTAA and Article 25 of India –
Singapore DTAA
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in the hands of the company and secondly in the hands of the shareholders (on the
Underlying tax credit
(7/7)
Underlying tax credit - Illustration
Particulars
Amount in INR
Taxation of Indian Subsidiary Co of UK Holding Co In India
Profit of Subsidiary Co in source state (India)
100,000
Taxes (30%)
(30,000)
Profit after tax
70,000
Dividend distributed
50,000
Dividend paid to UK Holding Co (70% holding)
35,000
Dividend Distribution Tax on above (15%)
(A)
(5,250)
Profit of UK Holding Co in UK
200,000
Dividend income
35,000
Taxable income
235,000
Tax Rate (40%)
(B)
94,000
Underlying Tax Credit [35,000 * 30,000 / 70,000]
(C)
(15,000)
Total Tax Credit (A) + (C)
(D)
20,250
Total Tax after Relief
73,750
Foreign tax credit | 23
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Taxation of UK Holding Co in UK
Double non-taxation
Double non-taxation
(1/2)
Double non-taxation is a situation where on account of benefits available under
DTAA, a tax payer is not liable to tax in both the Resident state as well as Source
state
Capital Gains taxability under the India – Mauritius tax treaty is a classic example of
the same
Company X
(Mauritius
resident)
Capital Gains exempt in
Mauritius as per Mauritius
tax laws
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Mauritius
India
Sale of shares
of Indian Co
Mr X
Shares held
Indian Co
Capital Gains exempt in India for a
Mauritius resident as per DTAA
between India and Mauritius
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Double non-taxation
(2/2)
As visible from the diagram, the above arrangement discharges Company X from
tax liability from both the Resident state (Mauritius) as well as Source state (India)
Some companies take undue advantage of the above arrangement by merely
incorporating subsidiaries in low-tax jurisdictions and by shifting the profits through
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legal planning into these subsidiaries
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Excess FTC
Excess FTC
(1/2)
The amount of FTC that can be claimed in India is the lower of:
 The amount of foreign income tax paid; or
 The amount of income tax chargeable on that foreign source income in India
A taxpayer will not be able to claim full FTC in India if the amount of income tax paid
in the foreign country is higher than the amount of income tax payable in India on that
foreign source income
The DTAA’s entered by Government of India do not permit carry forward of excess
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FTC.
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Excess FTC
(2/2)
Following countries allow carry forward of excess foreign tax paid:
Carry-back
(No of
years)
Reference
Canada
10
3
Section 126(2)(a) of the Canada Income Tax Act
Japan
3
3
Code No 12007 of National Tax Agency
Singapore
No limit
-
Section 50 of the Singapore Income Tax Act
UK
No limit
3
Sections 72 to 74 of the Taxation (International
and Other Provisions) Act 2010
10
1
IRC Section 904 (c)
USA
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FTC carry forward
(No of years)
Source: www.taxsutra.com
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Documentation
Documentation required for FTC
Overseas Tax withholding certificates evidencing payment of taxes in foreign
jurisdiction
External third party confirmation
Overseas Tax Returns, if any
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Certificate from Foreign Tax authorities, where possible
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Cases where FTC is not available
Cases where FTC not available
(1/2)
Not furnishing of Permanent Account Number (‘PAN’)
In case a foreign resident does not furnish a PAN; any payment made to him shall be
subject to withholding tax at the higher of the following rates:
•
at the rate specified in the relevant provision of the Act; or
•
at the rate or rates in force; or
•
at the rate of twenty percent
If a foreign resident for the reasons mentioned above is subject to withholding tax at a
additional amount withheld on account of non furnishing of PAN; which is penal in
nature
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higher rate than tax rate provided under the DTAA, availing FTC will be difficult on the
Cases where FTC not available
(2/2)
Foreign Account Tax Compliance Act (‘FATCA’) - US
If an Indian resident earning interest income from USA (source country) does not
comply with FATCA reporting requirements, than he may be liable to an additional
withholding tax of 30% on the interest income so earned
However, availing FTC will be difficult on the taxes withheld on this account as it is
not covered under the definition of ‘Taxes covered’ under the DTAA and are merely
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penal in nature
Foreign tax credit | 34
Direct Tax Code
FTC under the Direct Taxes Code, 2010
Provisions similar to existing Section 90(2) and Section 91 of the Act
Available only to a ‘Resident in India’
Amount of credit restricted to:
 the Indian income-tax payable in respect of income which is taxed outside India; and
 the Indian income-tax payable in respect of total income of the assessee
Requirement of TRC to claim treaty benefits
 Limited Treaty Override – Treaty benefits not available if General Anti Avoidance Rules or
Controlled Foreign Corporation (‘CFC’) provisions are invoked or if Branch Profit Tax is levied
Need to address issues of grant of FTC in cases where CFC provisions are
invoked
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 Government to prescribe the methods, manner and other particulars
Practical issues
Practical issues in FTC – Timing
(1/6)
April, 2012
USA return to
be filed by
April 15, 2013
US Fiscal
Year 2012
Indian
Fiscal
2012-13
US Fiscal
Year 2013
USA return to
be filed by
April 15, 2014
March, 2013
Indian Return for the fiscal year 2012-13 to be filed by July 31, 2013 / September 30, 2013
How to claim credit for the final tax liability for the period Jan-Mar 2013
in Indian tax filings for 2012-13?
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December, 2012
Practical issues in FTC – DDT
(2/6)
Any amount declared, distributed or paid by way of dividend is subject to DDT
DDT is neither a withholding tax on dividend income nor a tax on the profits of the
company from which dividend is declared
Under the DTAAs, tax credit is typically available for tax on income (ie income-tax)
and for tax on the profits of the company from which dividend is declared (ie UTC).
Therefore, tax credit on DDT is per se not available under the DTAAs
tax or underlying tax as per its domestic law
Similar issue could arise in respect of Buy-back Distribution Tax
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However, credit for DDT can be availed if Resident state considers DDT as income-
Practical issues in FTC – inter-country adjustment (3/6)
Indian
Company X
Country A
Tax paid
INR 20
Country B
Tax paid
INR 10
Profit of INR 100 mn
Alternative Options:
1. Whether loss in India to be adjusted against profit from Country A?
2. Whether loss in India to be adjusted against profit from Country B?
3. Whether loss in India to be adjusted proportionately against profit
from Country A and B?
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India
Practical issues in FTC – Migration of residence
Year 1
(4/6)
Year 2
Foreign expatriate
Mr X pays tax at the time
of grant of ESOP
India
Mr X pays tax at the time
of exercise of ESOP
Double taxation as he may not be able to get FTC for taxes paid in year
of grant
Foreign tax credit | 41
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Belgium
Practical issues in FTC – FOREX
(5/6)
Exchange Rate
Prevailing
Indian resident derives business income of USD 100
in source state
1$ = INR 45
Tax paid in source state of USD 15
1$ = INR 46
Realization of income
1$ = INR 44
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Particulars
Which of the above exchange rate should be considered for the
purpose of calculation of the quantum of foreign taxes that are
available for FTC?
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Practical issues in FTC – indirect transfers
(6/6)
Indirect transfer
•
USA
tax capital gains in accordance
with the provisions of its
domestic law
100%
•
Mauritius
Mauritius
Co
Both the countries have right to
Credit for taxes paid in India
available in the US?
•
Credit for taxes paid in India
pursuant to recently introduced
India
100%
provisions pertaining to indirect
transfers?
India Co
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US Co
Sale of shares
held in Mauritius
entity to third
party
Case Studies
Case study 1
Facts
Company A pays Federal and State taxes in the USA
 Taxes covered as per Article 2 of India – USA DTAA in the USA include ‘federal income taxes’
imposed by the Internal Revenue Code
Deduction of foreign taxes disallowed under Section 40(a)(ii) of the Act as any ‘any
taxes’ paid covered
 any sum paid on account of any rate or tax levied on the profits or gains of any business or
shall not be deducted from Business income
Credit for only Federal income taxes paid is allowed as per India – USA DTAA
Question
Would Company A be eligible to claim credit of the State taxes under Section 91 in
light of Section 90(2) of the Act?
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profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains
Case study 1
Held
In the case of Tata Sons Limited v DCIT (43 SOT 27), it has been held that the view
that State taxes cannot be allowed as a deduction and also cannot be taken into
account for giving credit is incongruous and results in a contradiction. A tax payment
which is not treated as admissible expenditure on the ground that it is payment of
income tax has to be treated as eligible for tax credit
While Section 91 of the Act allows credit for Federal and State taxes, the DTAA
beneficial to the assessee and by virtue of Section 90(2) of the Act, provisions of
Section 91 must prevail over the DTAA even though this is a case where India has
entered into a DTAA
Accordingly, even an assessee covered by the scope of the DTAA will be eligible for
credit of State taxes under Section 91 of the Act despite the DTAA not providing for
the same
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allows credit only for Federal taxes. The result is that the Section 91 is more
Case study 2
Facts
Company A has operations in India, Country A and Country B
Income details of the branches in Country A and Country B are as follows
Income/(Loss)
Country A
Rs 1,000
Country B
(Rs 300)
Total (post set-off)
Rs 700
Question
For the purposes of relief under Section 91(1), whether income of Rs 1,000 or Rs 700
to be considered?
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Branch
Case study 2
Held
In the case of CIT v Bombay Burmah Trading Corporation (259 ITR 423), Bombay
High Court held that Section 91 read with explanation of ‘rate of tax of the said
country’, it is evident that the section deals with granting relief calculated on income
country-wise and not on the basis of amalgamation or aggregation of income of all
foreign countries
Expression ‘doubly taxed income’ indicates that the phrase has reference to the tax
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which the foreign income bears when it is again subjected to tax by its inclusion under
the Act
Thus, relief has to be considered country-wise
Foreign tax credit | 48
Case study 3
Facts
Assessee (Resident of India) earns income from provision of export services outside
India
Tax deducted at source on the above income
Deduction of 50% was claimed by assessee under section 10A [Entities established
in Special economic zone (’SEZ’)] of the Act while offering the above income to tax in
India
For the purposes of relief under Section 91(1) of the Act , whether FTC can be
claimed on entire taxes deducted in foreign country?
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Question
Case study 3
Held
In the case of Dr K.L.Parikh v ITO, 1982 (14 TTJ 117), the assessee claimed that
relief from Double taxation must be allowed in respect of entire amount of taxes
deducted at source. The assesse has earned income from Iran on which taxes were
deducted. While offering the foreign sourced income to tax in India, Assessee had
claimed deduction (upto 50 percent) under section 80RRA of the Act. The
Commissioner of Income-tax (Appeals) [‘CIT(A)’] rejected the assessee’s claim and
The Tribunal rejected CIT(A) claim and declared the decision in favour of the
assessee
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allowed relief upto 50 percent of taxes deducted
Case study 3
However, Rajasthan High Court held that the Tribunal was not justified in holding that
the assessee was entitled to credit for the entire amount of tax deducted at source in
Iran under section 91(1) of the Act, and not in proportion to the income included in the
total income of the assessee after considering the provisions of section 80RRA of the
Act and relief was granted proportionately upto 50 percent of FTC
Based on above, same principle will apply to entities established in SEZ and hence
they cannot claim tax credit on foreign taxes paid abroad in respect of incomes which
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are exempt from tax in India
Foreign tax credit | 51
THANK YOU
For any queries please contact:
Kalpesh Desai
Partner
BMR Advisors
BMR House, 36,
Dr RK Shirodkar Marg,
Parel, Mumbai 400 012
Kalpesh.Desai@bmradvisors.com
Article 4 - Resident
1. For the purposes of this Convention, the term "resident of a Contracting State"
means any person who, under the laws of that State, is liable to tax therein by
reason of his domicile, residence, place of management or any other criterion
of a similar nature, and also includes that State and any political subdivision or
local authority thereof. This term, however, does not include any person who is
liable to tax in that State in respect only of income from sources in that State or
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capital situated therein.
Foreign tax credit | 53
Article 23 - Methods for elimination of double taxation
Article 23A - Exemption Method
1. Where a resident of a Contracting State derives income or owns capital which, in
accordance with the provisions of this Convention, may be taxed in the other
Contracting State, the first-mentioned State shall, subject to the provisions of
paragraphs 2 and 3, exempt such income or capital from tax
2. Where a resident of a Contracting State derives items of income which, in
accordance with the provisions of Articles 10 and 11, may be taxed in the other
the income of that resident an amount equal to the tax paid in that other State. Such
deduction shall not, however, exceed that part of the tax, as computed before the
deduction is given, which is attributable to such items of income derived from that
other State
Foreign tax credit | 54
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Contracting State, the first-mentioned State shall allow as a deduction from the tax on
Article 23 - Methods for elimination of double taxation
Article 23A - Exemption Method
3. Where in accordance with any provision of the Convention income derived or capital
owned by a resident of a Contracting State is exempt from tax in that State, such
State may nevertheless, in calculating the amount of tax on the remaining income or
capital of such resident, take into account the exempted income or capital.
4. The provisions of paragraph 1 shall not apply to income derived or capital owned by a
resident of a Contracting State where the other Contracting State applies the
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provisions of the Convention to exempt such income or capital from tax or applies the
provisions of paragraph 2 of Article 10 or 11 to such income
Foreign tax credit | 55
Article 23 - Methods for elimination of double taxation
Article 23B – Credit Method
1. Where a resident of a Contracting State derives income or owns capital which, in
accordance with the provisions of this Convention, may be taxed in the other
Contracting State, the first-mentioned State shall allow:
a) as a deduction from the tax on the income of that resident, an amount equal to the income tax
paid in that other State;
b) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax
paid in that other State
or capital tax, as computed before the deduction is given, which is attributable, as the
case may be, to the income or the capital which may be taxed in that other State.
2. Where in accordance with any provision of the Convention income derived or capital
owned by a resident of a Contracting State is exempt from tax in that State, such
State may nevertheless, in calculating the amount of tax on the remaining income or
capital of such resident, take into account the exempted income or capital
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Such deduction in either case shall not, however, exceed that part of the income tax
Full exemption - Article XVII of India – Greece DTAA
1. The laws in force in either of the territories will continue to govern the assessment
and taxation of income in the respective territories except where express provision to
the contrary is made in this Agreement
2. Subject to the provisions of Article VI* income from sources within Greece which
under the laws of Greece and in accordance with this Agreement is subject to tax in
Greece either directly or by deduction shall not be subject to Indian tax
3. Subject to the provisions of Article VI income from sources within India which under
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the laws of India and in accordance with this Agreement is subject to tax in India
either directly or by deduction shall not be subject to Greek tax
*Article VI – Deals with income from Shipping
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Partial exemption - Article 23 of India – Austria DTAA
2 (a) Where a resident of Austria derives income which, in accordance with the provisions
of this Convention, may be taxed in India, Austria shall, subject to the provisions of
sub-paragraphs (b) and (c) exempt such income from tax
(b) Where a resident of Austria derives items of income which, in accordance with the
provisions of paragraph 2 of Articles 10 (dividend), 11 (interest), 12 (royalties),
paragraphs 4 and 5 of Article 13 (capital gains) and paragraph 3 of Article 22 may be
taxed in India, Austria shall allow as a deduction from the tax on the income of that
exceed that part of the tax, as computed before the deduction is given, which is
attributable to such items of income derived from India
(c) Where in accordance with any provision of the Convention income derived by a
resident of Austria is exempt from tax in Austria, Austria may nevertheless, in
calculating the amount of tax on the remaining income of such resident, take into
account the exempted income
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resident an amount equal to the tax paid in India. Such deduction shall not, however,
Full credit - Article 23 of India – Namibia DTAA
1. ……………..
2. In India, double taxation shall be eliminated as follows :
Where a resident of India derives income or capital gains from Namibia, which, in
accordance with the provisions of this Convention may be taxed in Namibia, then
India shall allow as a deduction from the tax on the income of that resident an amount
equal to the tax on income or capital gains paid in Namibia, whether directly or by
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deduction
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Ordinary credit - Article 25 of India – USA DTAA
1. ……………..
2. (a) Where a resident of India derives income which, in accordance with the provisions
of this Convention, may be taxed in the United States, India shall allow as a
deduction from the tax on the income of that resident an amount equal to the incometax paid in the United States, whether directly or by deduction. Such deduction shall
not, however, exceed that part of the income-tax (as computed before the deduction
is given) which is attributable to the income which may be taxed in the United States
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(b) ……………
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Tax sparing - Article 25 of India – Singapore DTAA
4. Subject to the provisions of the laws of Singapore regarding the allowance as a credit
against Singapore tax of tax paid in any country other than Singapore, Indian tax
paid, whether directly or by deduction, in respect of income from sources within India
shall be allowed as a credit against Singapore tax payable in respect of that income.
Where such income is a dividend paid by a company which is a resident of India to a
resident of Singapore which owns not less than 25 per cent of the share capital of the
company paying the dividends, the credit shall take into account Indian tax paid in
5. For the purposes of paragraph 4 of this Article the term "Indian tax paid" shall be
deemed to include any amount of tax which would have been payable in India but for
a deduction allowed in computing the taxable income or an exemption or reduction of
tax granted for that year in question
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respect of its profits by the company paying the dividends.
Tax sparing - Article 25 of India – Singapore DTAA
a. Section 10(4), 10(4B), 10(5B), 10(15)(iv), 10A, 10B, 33AB, 80-I and 80-IA, insofar as
these provisions were in force and have not been modified since the date of signature
of this Agreement, or have been modified only in minor respects so as not to affect
their general character
b. Any other provision which may subsequently be enacted granting an exemption or
reduction of tax which is agreed by the competent authorities of the Contracting
States to be of a substantially similar character to a provision referred to in sub-
has been modified only in minor respects so as not to affect its general character
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paragraph (a) of this paragraph, if such provision has not been modified thereafter or
Underlying tax credit - Article 24 of India – UK DTAA
1. Subject to the provisions of the law of the United Kingdom regarding the allowance as
a credit against United Kingdom tax of tax payable in a territory outside the United
Kingdom (which shall not affect the general principle hereof):
(a) ……………..
(b) In the case of a dividend paid by a company which is a resident of India to a
company which is a resident of the United Kingdom and which controls directly or
indirectly at least 10 per cent of the voting power in the company paying the dividend,
allowed under the provisions of sub-paragraph (a) of this paragraph] the Indian tax
payable by the company in respect of the profits out of which such dividend is paid
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the credit shall take into account in [addition to any Indian tax for which credit may be
Comparison
Article 25 of India – Singapore DTAA
1. .............
1. ……….
2. (a) …………
2. Where a resident of India derives income which, in
(b)In the case of a dividend paid
accordance with the provisions of this
by a company which is a
Agreement, may be taxed in Singapore, India
resident of Mauritius to a
shall allow as a deduction from the tax on the
company which is a resident of
income of that resident an amount equal to the
India and which owns at least
Singapore tax paid, whether directly or by
10 per cent of the shares of the
deduction. Where the income is a dividend paid
company paying the dividend,
by a company which is a resident of Singapore to
the credit shall take into
a company which is a resident of India and which
account [in addition to any
owns directly or indirectly not less than 25 per
Mauritius tax for which credit
cent of the share capital of the company paying
may be allowed under the
the dividend, the deduction shall take into account
provisions of sub-paragraph (a)
the Singapore tax paid in respect of the profits
of this paragraph] the Mauritius
out of which the dividend is paid. Such deduction
tax payable by the company
in either case shall not, however, exceed that part
in respect of the profits out of
of the tax (as computed before the deduction is
which such dividend is paid
given) which is attributable to the income which
may be taxed in Singapore
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Article 23 of India – Mauritius DTAA