Know how you can claim relief under Double Taxation?

Last Updated at: Dec 01, 2020
How you can claim relief under Double Taxation_
Resident individuals are liable to pay tax on their global income in India. Thus, while filing ITR, in addition to furnishing salary income in India, he has to report income derived from overseas. Double taxation relief may be available in the form of credit or exemption, as per the DTAA with the respective country. The provisions of the I-T Act shall apply to the extent they are more beneficial to him. If no DTAA exists, he may get credit of taxes paid abroad under Section 91 of the Income Tax Act.


The opportunities to work abroad have become more common and the number of such offers have increased manifold. More people are migrating to other countries around the world in search of better employment opportunities and better pay. The increase in the number of immigrants has made developed nations have strict policies and rules for the migration and employment of such international workers.

So how does working abroad affect Indians when it comes to paying their taxes? If you are someone who has just shifted abroad or are planning to do so, then one of the most important things that you need to pay heed to is how to pay your taxes. The domestic policies of various countries differ greatly, and hence staying on top of your taxation rules is something every expatriate and NRI needs to do. However, when you move abroad mid-fiscal year things get a little more complicated. This is because such a situation may lead to you getting taxed in both India and the country to which you have migrated. So here’s a look at how to get over your taxation woes and claim relief whenever you can.

Bilateral Relief

If you are getting taxed in your country of work, and in India as well, then the idea of bilateral relief comes into the picture. The double taxation relief claim ensures that you don’t end up paying too much tax for the same income. This becomes an issue when you pay taxes in both India and are then taxed again based on your global income in the country of your working. The DTAA, which is the double taxation avoidance agreement ensures that taxpayers don’t have to pay taxes twice on the same income. In case you feel you are getting taxed twice, then relief u/s 90 is how you can claim tax credits as per Section 90.

Similarly, relief u/s 90A works in DTAA is in place for only specific associations. However, there are a few countries that do not currently have any DTAA with India, and in such cases, tax relief may be sought through relief u/s 91. 

Relief from Double Taxation

Bilateral Relief

Whenever an agreement has been signed by both the countries, relief calculation is done based on the agreement, and the relief  may be granted via two methods:

  1. Exemption Method: Taxation is done only in one country
  2. Tax Relief Method: Taxation occurs in both countries, following which relief is granted by the country of residence of the individual.
Unilateral Relief

In cases where there is no agreement in place, the relief is provided by the country of residence. In such cases, u/s 91 is used to claim the credit.

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Tax Relief via u/s 90

This occurs whenever there is a DTAA between India and another country as a whole. In such cases, the individual leaves for abroad mid-year and hence receives salary from both India and from that foreign country. Tax deduction occurs from both salaries, following which relief is claimed through U/s. 90.

Computing Double Taxation relief:

  1. Compute the total global Income
  2. Calculate tax on total global income 
  3. Compute average tax
  4. Multiply average tax with Foreign income 
  5. Calculate tax paid in Foreign country
  6. Relief is whichever is lower between 4 and 5 

For example, if A earned in India Rs. 3,00,000/-, and earned from the foreign country Rs. 1,00,000. The tax paid in foreign country amounts to Rs. 10,000. In such a case;

Global income is Rs.3,00,000+ Rs.1,00,000 = Rs. 4,00,000/-

Tax Rs. 15,000/-

Average tax 15,000/4,00,000*100 = Rs. 3.75% 

Tax to be paid Rs.1,00,000*3.75/100 = Rs. 3,750/- 

Tax paid Rs. 10,000/-.

Relief = Rs. 3,750/-

Tax Relief via u/s 90A

This occurs when the DTAA has been signed between India and a specified association abroad. In such cases, tax relief may be claimed via u/s 90A as per the Income Tax Act, 1961. In case the organisation has no agreement with your country, then such individuals have to procure a Tax Residence Certificate from their respective government.

Tax Relief via u/s 91

This occurs when the country in which you are working and India have no DTAA signed between themselves. In such cases, tax relief claims must be filed via u/s 91. 

Computing relief

  1. Calculate the tax payable in India
  2. Compare the Indian tax rate and Foreign tax rate
  3. Multiply the lower tax rate with the doubly taxed income
  4. This multiplied total is the relief 

For example, if A has a doubly taxed foreign income of Rs. 1,00,000/-, when the tax payable in India is to be calculated at the rate of 30% and the foreign tax rate is 20%, then the relief is;

Tax payable in India 1,00,000*30% = Rs. 30,000/- 

Lower tax rate between 30% and 20% is 20%.

Relief 1,00,000*20% = Rs. 20,000/-

Country & its TDS rate

  1. USA, UK, Canada, Australia –15%
  2. Germany, South Africa, New Zealand10%
  3. Singapore – 15%
  4. Mauritius – 7.5% – 10%
  5. Malaysia, Qatar, Oman, Sri Lanka – 10%
  6. UAE – 12.5%
  7. Thailand – 25%
  8. Russia, Kenya – 10%

Types of Income included under the Double Tax Avoidance Agreement

  • Services originating and provided within India
  • Salary from India
  • Income from property within India
  • Capital gains from India
  • FD and Savings Account in India