Section 91 Double taxation relief if there is no Double Taxation Avoidance Agreement
The following conditions are need to satisfy for the claim of relief under the section 91
- Assessee is resident in India
- Income derived from foreign country
- Tax should have been deducted or paid in foreign country
- There should not be any DTAA agreement wiht foreign country
Steps for Computation of Relief Under the Section 91
Step-1 Compute the Net Taxable Income ( Includes both Indian income and foreign income)
Step-2 Find out the gross tax before claiming TDS/TCS, MAT/AMT credit, Advance tax but after adding surcharge and Higher education cess.
Step-3 Average of Tax on Net Taxable Income i.e
= Gross tax X 100/ Net Taxable Income
Step-4 Find out rate at which tax paid/ deducted in foreign country
Step-5 Find out lower rate from step 3 & 4
Step-6 Relief under section 91 = Foreign Income X Rate computed in step 5
Some Key Points Under the Double Taxation
- Provision of DTAA or Income Tax Act whichever is more beneficial to the assessee shall apply. However provision of GAAR shall apply even if such provisions are not beneficial to assessee.
- The charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge of levy of tax in respect of such
- Non resident to whom DTAA applies, shall not be entitled to claim any relief under DTAA unless Tax Residence Certificate(TRC) of his being resident in any foreign country is obtained by him from foreign govt.
- The TRC produced by a resident of a contracting state and the Income Tax Authorities in India will not go behind the TRC and question his residential status. In addition to TRC the assessee would be required to provide such other documents and information as may be prescribed for claiming the treaty benefit
- Status of Assessee
- Permanent account number of assessee (If Allotted)
- Nationality (In case of Individual)
- Country or Specified territory for Incorporation or registration.
- Assessee’s Tax Identification Number in the country or Specified territory of residence and in case there is no such number the unique number on the basis of which the person is identified by the state govt. or specified territory of which the assessee claim to be resident.
- Period for which the residential status, as mentioned in the certificate
- Address of the assessee in the country or specified territory outside India.
However, the assessee may not be required to provide the information any part thereof, if the information or the part thereof, as the case may be, is already contained in the TRC.
Concept of Permanent Establishment
Permanent Establishment means a fixed place of business through which the business of an enterprises is wholly or partly carried on. Every DTAA has specified ed clause, which will deal with an explanation of permanent establishment for the purpose of such DTAA. Business Income of a non-resident will not be taxed in India, unless such Non- resident has a permanent establishment in India.
Permanent Establishment includes
- A place of management
- A branch
- An office
- A factory
- A workshop
- A sales outlet
- A warehouse
- A mine or oil or gas well, a quary or any other place of extraction of natural resource (Not exploration)
As per DTAA business income of Non- resident is taxable in India only if such NR has Permanent Establishment in India but as per Income Tax Act Business income of Non-resident taxable in India if Non -resident having business connection in Indaia as per section -9.
