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Double Taxation means that in case of a resident assesse who has earned income outside India which is already been taxed in that country shall be included in his total income & he shall again be liable to pay Tax on such income. Therefore, in order to avoid such cases “DOUBLE TAXATION RELIEF” was introduced.

Double taxation relief works on the basis of following principal:-

  1. Bilateral Agreement (Section 90)
  2. Unilateral Agreement (Section 91)

Where India has entered into any mutual agreement with outside country with the objective of double taxation relief then such relief shall be provided on the basis of methods prescribed under such Bilateral Agreement (also Known as “DTAA”)

However, there are many cases where income has been taxed in that country with which India has not entered into any Mutual agreement and thus relief in these cases shall be provided by way of Unilateral Agreement.


Section 91 states that relief shall be provided when following conditions are satisfied:-

  1. Assessee is a resident in India in respect of previous year in which income is taxable
  2. Income accrues or arises to him outside india
  • Such income does not deemed to accrues or arises to him in india
  1. Such income is subject to Income tax outside country
  2. Assessee has paid Tax on such income outside country
  3. No DTAA exist between India and that other country for double taxation relief

Now procedure for relief can be explained with the following example:-

Example: – Mr A is a resident in India who has earned salary income of Rs. 3 Lakh from Country B (Assumed that no DTAA exist) and his other sources income earned in India is Rs. 7 Lakh. He has paid Tax of Rs. 15000 in country B. Now we have to calculate relief u/s  91 ??

Solution:-  Step 1:- Calculation of his GTI & Tax as per Income tax Act 1961

Salary Income                                                   Rs. 3,00,000

Other Sources                                                   Rs. 7,00,000

GTI                                                                 Rs. 10,00,000

                                             TAX                                                                 Rs. 1,28,750


Step 2:- Calculation of Average Tax rate (both Indian and outside)

Average Indian Tax rate = 12.875 % (128750/1000000*100)

Average foreign tax rate = 5.00 % (15000/300000*100)


Step 3:- Deduction shall be calculated as follows:-

Income accrued o/s india * [Lower of (Indian tax rate or Foreign Tax rate)]

= 3,00,000 * 5.00% = Rs. 15,000

Thus, his net tax will be Rs. 1,13,750 (Rs. 1,28,750- Rs. 15000)




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