comments on the draft rule for giving foreign tax credit

8/17/2019 Comments on the Draft Rule for Giving Foreign Tax Credit

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Comments on the DRule for giving Foreig

Credit

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1. Introduction:

Finance Act 2015, inserted, w.e.f. 01.06.2015, clause!a" in su#-section 2 of $ection 295. %t ena#les t!e&oard, su#'ect to t!e control of Central (o)ernment,#* a noti+cation in t!e (aette of %ndia, to maerules secif*in/ t!e rocedure for /rant of relief,deduction of an* %ncome tax aid in an* countr* or

seci+ed territor* outside %ndia us 90, or $ection90A or $ection 91, a/ainst t!e income-tax a*a#leunder t!e Act. Accordin/l*, t!e &oard !as, inaccordance wit! t!e recommendation made #* t!eCommittee constituted #* it, )ide 33F.N.142242015-378, A3 1:-4-2016,announced raft ules for /rantin/ relief ordeduction under section 9090A91 of t!e %ncome-taxAct, 1961.

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2. $alient features of raft ule<

3!e salient features of t!e ules are<

i. For t!e urose of /i)in/ credit, Forei/n tax means-

a" 3ax co)ered in t!e ou#le 3axation A)oidance A/reement entered into #* %ndia wit! a cou$ection 9090A.

#" 3ax, #ein/ in t!e nature of %ncome tax referred to in clause i)" of t!e xlanation to sectiunder t!e laws in force in a countr*, wit! w!ic! %ndia does not !a)e ou#le 3axation A)oidan

ii. 3!e Forei/n 3ax Credit s!all #e allowed to an %ndian resident #* wa* deduction or ot!erwisew!ic! t!e income corresondin/ to suc! tax !as #een o=ered to tax or assessed to tax in %ndmanner and to t!e extent as seci+ed in t!is rule.

iii. 3!e Forei/n 3ax Credit s!all #e allowed onl* a/ainst %ncome tax, $urc!ar/e and cess a*a%ncome tax Act and not a/ainst an* interest fee or enalt*.

i). No credit of Forei/n 3ax s!all #e allowed if, it is disuted in an* manner in t!e $ource Cou


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). 3!e forei/n tax in resect of eac! source of income in a articular Forei/n Countr* or secs!all #e calculated searatel* and a//re/ated. 3!e credit of suc! a//re/ate s!all #e allowedfollowin/ manner& or 115>C in t!e sait is allowed a/ainst tax a*a#le under t!e normal ro)isions of t!e Act.

)ii. ?!ere Forei/n 3ax Credit !as #een allowed a/ainst tax a*a#le us 115>& and 115>C and

3ax Credit exceeds t!e credit a)aila#le a/ainst tax a*a#le under normal ro)isions of t!e Acomutin/ t!e amount of credit us 115>AA or 115> in resect of t!e taxes aid us 115>& oexcess s!all #e i/nored.

)iii. For claimin/ Forei/n 3ax Credit followin/ documents are re@uired to #e furnis!ed #* asse

a" Certi+cate from t!e 3ax Aut!orit* of Forei/n Countr* secif*in/ t!e nature of income and tax deducted t!erefrom or aid #* t!e assessee.

#" %n case of tax deducted at source a certi+cate from t!e erson resonsi#le for deduction

c" %n case of online a*ment of forei/n tax, acnowled/ment or #an counter foil or a sli o

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;. xamles exlainin/ ules<

i" %f a//re/ate of Forei/n tax aid in a countr* is s. 1000-calculated at t!e tele/ra!ic tr

rate on t!e date on w!ic! suc! tax !as #een aid or deducted"-

a" And if, %ncome tax, surc!ar/e and cess a*a#le in %ndia is s. 900- t!en credit of Forei/extent of s. 900- onl* will #e allowed and t!e rest of s. 100- s!all #e i/nored.

#" And if, %ncome tax, surc!ar/e and cess a*a#le in %ndia is s. 900- interest a*a#le in200- t!en Forei/n 3ax Credit will #e allowed to t!e extent of s. 900- onl*. No credit a/ains#e allowed. Be will !a)e to a* interest of s. 200- in %ndia.

c" And if, %ncome tax, surc!ar/e and cess a*a#le in %ndia is s. 1100- and interest c!ar/e

t!en credit to t!e extent of s. 1000- a/ainst tax a*a#le s!all #e allowed and t!e assessea* s. 100- as tax in %ndia and interest of s. 200-.

d" No credit of Forei/n 3ax s!all #e allowed a/ainst fee or enalt*.

e" %f out of s. 1000- of forei/n tax an amount of s. ;00- is a disute in t!e Forei/n Councredit of onl* s. 00- s!all #e allowed. Accordin/l* in examle a" and #" assessee will !a200-, interest examle #""D in examle c" assessee will !a)e to 7a* s. 400- interes

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comments on the draft rule for giving foreign tax credit

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