How to Claim Double Taxation Relief Under Section 90
- Nimisha Panda
- 5 days ago
- 9 min read
Double taxation occurs when income earned abroad by an Indian resident is taxed both in the foreign country and in India. Section 90 of the Income Tax Act, 1961, allows residents to claim relief through the Double Taxation Avoidance Agreement (DTAA) signed between India and other countries. This ensures that the same income isn’t taxed twice. By using DTAA provisions, taxpayers can either claim exemption or receive credit for taxes already paid overseas, depending on the treaty terms.
Table of Contents
Understanding Section 90 and the Double Taxation Avoidance Agreement (DTAA)
Section 90 of the Income Tax Act, 1961 empowers the Indian government to enter into agreements with other countries to eliminate double taxation on the same income. This means if a person earns income in a foreign country and also qualifies as a resident of India, both countries may levy taxes on that income. The DTAA ensures that such individuals or entities are not taxed twice for the same income, promoting international trade and investment. Depending on the treaty, taxpayers can claim either exemption or tax credit relief to offset the taxes paid abroad against their Indian tax liability.
Eligibility to Claim Double Taxation Relief Under Section 90
To claim relief under Section 90, the taxpayer must be a resident of India earning income from a country that has an active DTAA with India. The individual or entity must have paid taxes on that foreign income in the source country. The income should be included in the taxpayer’s total income in India as per domestic laws. Furthermore, the taxpayer must possess a valid Tax Residency Certificate (TRC) issued by Indian authorities and provide Form 10F when filing the income tax return.
Documents and Forms Required for Claiming Relief
The primary documents required for claiming relief under Section 90 include:
Tax Residency Certificate (TRC): Confirms that the individual is a resident of India.
Form 10F: Contains essential details like nationality, tax identification number, and address.
Proof of Foreign Tax Paid: Such as tax withholding certificates, salary slips, or bank statements showing tax deductions abroad.
DTAA Agreement Reference: The relevant article of the DTAA under which the claim is being made. Submitting these documents ensures that the Income Tax Department validates the claim efficiently and avoids any discrepancies during assessment.
How to File Income Tax Return and Claim Foreign Tax Credit
Taxpayers should first declare all foreign income under the relevant heads in the ITR. The amount of tax paid in the foreign country should be disclosed in Schedule FSI (Foreign Source Income) and the credit for taxes paid abroad should be mentioned in Schedule TR (Tax Relief). If the foreign income has been subjected to TDS abroad, the details of the withholding should be entered in Schedule TDS2. Filing must be done before the due date to ensure eligibility for claiming foreign tax credit under Rule 128. Using professional tax platforms like TaxBuddy can make this process error-free, as they automatically map DTAA relief with the correct income sources.
Computation of Relief Under Section 90
The relief under Section 90 depends on the type of DTAA—either Exemption Method or Tax Credit Method. Under the exemption method, income taxed abroad is exempted in India. Under the tax credit method, the taxpayer pays taxes in both countries but can claim credit in India for the tax already paid overseas. The credit is limited to the lower of the tax payable in India or the tax paid in the foreign country on the same income. Proper computation ensures that taxpayers do not claim excess credit, which could lead to scrutiny.
Common Mistakes to Avoid While Claiming DTAA Relief
Taxpayers often make errors like failing to attach a valid TRC, claiming credit for taxes not actually paid, or selecting the wrong DTAA article while filing. Another frequent mistake is not converting foreign income and taxes into INR using the correct exchange rate on the specified date. Misreporting income in the wrong ITR schedule or claiming DTAA relief under the wrong section (90A or 91) can also lead to rejection. Filing through an expert-assisted platform like TaxBuddy minimizes these risks through AI-based verification.
Importance of Timely Compliance and Documentation
Timely submission of relevant documents such as the TRC, Form 10F, and proof of foreign tax payment is crucial. Any delay or missing information can result in disallowance of the foreign tax credit. Filing the ITR before the deadline ensures smooth processing of refunds and prevents notices under Section 143(1). Consistent documentation also helps in responding promptly if the Income Tax Department requests clarification.
Banking and DTAA: Practical Considerations
For individuals earning foreign income through interest, dividends, or capital gains, banks play a vital role in TDS deduction and reporting. Many banks automatically withhold taxes on remittances based on DTAA rates. Taxpayers should verify whether reduced TDS rates are applied as per the treaty. For example, under certain DTAAs, dividend income may be taxed at a lower rate of 10% instead of 20%. Submitting the TRC and Form 10F to banks in advance ensures that the correct TDS rate is applied during the transaction.
Difference Between Section 90, Section 90A, and Section 91
Section 90, Section 90A, and Section 91 of the Income Tax Act, 1961, deal with the relief available to taxpayers who have paid tax on the same income in both India and another country. These provisions are designed to eliminate or reduce the burden of double taxation on individuals or entities earning income from foreign sources. Although they serve a similar purpose, each section operates under different conditions and agreements.
Section 90 applies when India has entered into a Double Taxation Avoidance Agreement (DTAA) with another country. Under this section, taxpayers can claim relief according to the terms of the DTAA between India and the foreign country. The DTAA specifies how different types of income such as salary, business profits, dividends, or royalties are to be taxed, ensuring that income is either taxed only once or that the taxpayer receives a credit for taxes paid abroad. The objective of Section 90 is to promote international trade and investment by avoiding instances where the same income is taxed in both countries.
Section 90A extends similar relief but applies to cases where India has entered into agreements not directly with another government but with specified associations or bodies. These are typically agreements between organizations such as trade associations, chambers of commerce, or other entities that facilitate cross-border business relations. The provisions of Section 90A empower such entities to claim benefits or relief as per the terms of the agreements, provided they are approved by the Central Government and notified in the Official Gazette. This helps ensure fair tax treatment even in non-governmental international arrangements.
Section 91 provides unilateral relief in situations where India does not have a DTAA with the country from which income arises. In such cases, taxpayers who have paid taxes in the foreign country can still claim credit for the tax paid abroad against their Indian tax liability on the same income. This relief is available to both residents and individuals who have foreign income not covered under any bilateral treaty. The credit is limited to the lower of the Indian tax rate or the tax rate paid in the foreign country.
While Sections 90 and 90A depend on the existence of formal agreements or treaties between India and other entities, Section 91 ensures that Indian taxpayers are not disadvantaged even in the absence of such arrangements. Together, these provisions uphold the principle of fair taxation and help prevent double taxation on foreign income, thereby encouraging global business participation and compliance with international tax norms.
Role of TaxBuddy in Simplifying DTAA Relief Filing
TaxBuddy streamlines the DTAA relief process by automatically calculating the allowable tax credit under Section 90. Its system cross-verifies income details with AIS and Form 26AS to ensure consistency and prevent duplication. The platform also assists in preparing Form 10F, verifying TRC data, and mapping DTAA provisions correctly. For individuals with multiple sources of foreign income, TaxBuddy’s AI engine identifies relevant treaty articles and computes relief in real time, ensuring complete accuracy and compliance.
Conclusion
Understanding and claiming relief under Section 90 of the Income Tax Act is essential for anyone earning foreign income. The DTAA framework helps avoid double taxation, promotes global compliance, and ensures fairness in cross-border transactions. Proper documentation and accurate reporting are key to claiming these benefits successfully.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. What is Section 90 of the Income Tax Act? Section 90 empowers the Indian government to enter into Double Taxation Avoidance Agreements (DTAAs) with other countries. The objective is to ensure that income earned by a taxpayer in one country and taxed there is not taxed again in India. It provides a legal framework to avoid double taxation, promote international trade, and attract cross-border investment.
Q2. Who can claim relief under Section 90? Residents of India who earn income from a country with which India has signed a DTAA can claim relief under Section 90. The condition is that the taxpayer must have paid taxes on that income in the foreign country. This benefit ensures that the same income is not taxed twice—once abroad and again in India.
Q3. What is a Tax Residency Certificate (TRC) and why is it required? A Tax Residency Certificate (TRC) is an official document issued by the Indian tax authorities confirming that an individual or entity is a tax resident of India. It is mandatory for claiming DTAA benefits, as it proves eligibility to avoid double taxation. Without a valid TRC, the relief claimed under Section 90 may be rejected by the Income Tax Department.
Q4. What is the difference between the exemption and credit methods of DTAA relief? The exemption method excludes the foreign income from being taxed in India if it has already been taxed abroad. The credit method, on the other hand, allows the taxpayer to pay tax in both countries but claim a credit in India for the tax paid abroad. India generally follows the credit method for most of its DTAAs.
Q5. Can non-resident Indians (NRIs) claim DTAA relief? Yes, NRIs can claim DTAA relief in the country where they currently reside, as long as that country has a DTAA agreement with India. This ensures that income earned from India, such as interest or dividends, is not taxed twice—once in India and again in their country of residence.
Q6. What is Form 10F and when should it be filed? Form 10F is a declaration form that contains essential details such as name, address, nationality, and tax identification number of the taxpayer. It must be submitted along with the ITR or to the payer while claiming DTAA benefits. The form supports the TRC and helps verify the taxpayer’s eligibility for relief under Section 90.
Q7. How is the foreign tax credit calculated? The foreign tax credit (FTC) is calculated as the lower of the tax paid in the foreign country or the tax payable in India on the same income. This ensures fair taxation without double benefits. For example, if ₹30,000 is paid abroad and the Indian tax on the same income is ₹25,000, then the credit available will be ₹25,000.
Q8. What happens if I fail to submit TRC or Form 10F? Failure to provide TRC or Form 10F can lead to disallowance of DTAA relief. The taxpayer would then have to pay full taxes in India on the foreign income, without getting credit for the tax already paid abroad. Hence, maintaining proper documentation is crucial to claim relief successfully.
Q9. Are DTAA benefits available under both tax regimes? Yes, DTAA benefits are available under both the old and new tax regimes. Since DTAA relief prevents double taxation rather than providing a deduction or exemption, it is applicable regardless of the tax regime chosen.
Q10. How can I check whether India has a DTAA with a specific country? The complete list of DTAA partner countries is available on the official Income Tax Department website. You can also verify the relevant tax treaty clauses and rates applicable for that country. Platforms like TaxBuddy simplify this by automatically identifying applicable treaties when you report foreign income.
Q11. What are common errors while claiming DTAA relief? Common errors include incorrect conversion of foreign income into Indian rupees, missing TRC or Form 10F, claiming relief for non-taxed foreign income, or selecting the wrong DTAA article while filing. Such errors can result in notices, tax demands, or disallowance of the relief claim.
Q12. How does TaxBuddy help in DTAA relief filing? TaxBuddy automates the process of claiming DTAA relief by accurately computing foreign tax credit, validating treaty clauses, and matching them with the income reported in your ITR. It ensures the correct credit method is applied and all necessary forms (like TRC and Form 10F) are properly uploaded, preventing mismatches or disallowances during processing.
