How can one claim tax relief when there is No DTAA?
Hi @Dixita
In case there is No DTAA, then Tax Relief can be claimed u/s 91. You can follow the below-mentioned steps to compute relief:
- Compute tax payable in India
- Compute lower of Indian rate of tax and rate of tax in Foreign country
- Multiply the rate obtained in Step 3 by the doubly taxed income.
- Relief will be the amount as computed in Step 3
Hope this help 
A resident has invested money in US parent company. They distributed business profits. Issued K1 form also. Resident filed US ITR Form 1040NR wherein deduction for Self Employment Tax and Qualified business income deductions were allowed. He paid US taxes on income (X-above two deductions). Now in Indian ITR these two deduction will be available or he has to declare total income `X’ in his Indian ITR
Hey @rkarora1967,
Since he is a resident, the person is required to pay tax on his global income. Further, he will get the benefit of India – US DTAA wherein he can get the benefit of income tax paid in the USA, whether directly or by deduction. However, such deduction will be restricted to income tax on that income in India.
So, the business profits earned will be taxable in India. He has to declare total income and then claim credit of the taxes paid in the US under DTAA. So, eventually, his income from the US parent company after deductions will be taxed in India.
Dear Ms. Desai
THANK YOU VERY MUCH FOR THE GUIDANCE ON THE SUBJECT
HI
IF non resident having Interest and Dividend income in india and NO tax leviable in his current country as per DTAA rule, then can he/she claim relied under section 90?
For example Tax on dividend for NOn resident is 20% and as per DTAA its 10%, can he/she claim 10%while filing ITR?
Hello @AKSHAY1990 ,
DTAA can be claimed when same income is taxed in two countries. Since, no tax is levied in his current country, he will pay tax on Interest and Dividend income received in India.
Hope it helps.
Am I correct on my assumptions:
If a US partnership (1065) received divided from US Corp ( in which partnership has more then 50% holding).
It need to withhold to withhold 21% from Partner (an Indian Company) and Second Partner 37% from Indian partnership.
Indian Company can file 11020F and get 65% deduction (for Dividend Income from more 20% owned us domestics Corp). then get 65% tax refund .
Partner Indian partnership has to file own tax return 1065 but then the individual partners has to file own 1040 NR returns.
@Divya_Singhvi @Laxmi_Navlani @Kaushal_Soni can you?
Hey @SanDiego01 ,
Generally, taxability of income is determined by the residence rule. A Resident refers to a person who as per the relevant laws of the Contracting States, i.e. India and the US are liable to pay tax by reason of domicile, residence, citizenship, place of management, place of incorporation, etc.
As per Article 10 of India - USA Double Taxation Avoidance Agreement, Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
Eg: If a US Company pays a dividend to an Indian Resident shareholder, then the dividend income will be liable to tax in India. Further, USA (Company paying the dividend) also has a right to tax the said dividend in their state.
However, if the beneficial shareholder is a resident of India i.e. a resident of the other contracting state, then the tax so charged shall not exceed:
(a) 15 per cent of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 per cent of the voting stock of the company paying the dividends.
(b) 25 per cent of the gross amount of the dividends in all other cases.
You can additionally refer below article for more insights about DTAA:
Further, you can also file your tax returns and claim the foreign tax credit as well.
I hope, it helps!
I shifted to US in Dec 2020. In filing FY2020-21 tax return as Indian resident,
- US tax year is Jan-Dec2020. What period of my US salary do I have to include as foreign income, Dec 2020 alone or Dec2020-Mar2021? Since only US-2020 return has been finalized in US, Jan-onwards tax return will only be final next year. So how do I report jan-mar2021 taxes, pro-rated or per actual deducted taxes?
- To fill in ITR2, do I have to file Form 67 separately first and then fill Form FSI?
- Also, US-India DTAA treaty says US Federal taxes have to be claimed? Does this mean Social Security tax and California state income tax cannot be claimed?
Manish.
@Kaushal_Soni @Divya_Singhvi @Laxmi_Navlani @Saad_C can you help with this?
Hey @magnishe
While filing your income tax return for FY 2020-21 as indian resident, you should report US salary income according to US tax year i.e. Jan - Dec 2020 and no need to proportionate the income.
As per India-US DTAA, taxes mainly covered federal income taxes excluding social security tax, personal holding company tax and accumulated earning taxes.
Further, while filing ITR-2, Form 67 has to be filled on or before the due date of filing return.
You can read below article of Form 67 for more clarity:
Hope, it helps!
Hi Kaushal,
Thanks for the quick reply. This is helpful. Will show Dec2020 income in this year’s ITR. Thanks for pointing out Form67 requirement also.
So any Jan-Mar2021 US income will be shown in next year’s FY2021-22 return later?
Manish.
Hi,
I’ve few clarifications regarding tax deduction on foreign income. I’ve recently return to India on 11th December 2020 after on-site role in Australia. During Jan month india payroll, tax calculated for whole FY and deducted from Jan to Mar month paytoll. I was getting salary in australia from April 2020 to Dec 2020 and tax deducted in Australia payroll. After return in Dec 2020, tax was also deducted for same April to Dec on Jan 2021 to march india payroll even though I haven’t got any india salary. It’s dual tax on same salary from April 2020 to Dec 2020.
I read some of earlier post and form 67 other documentation to be done at the time of tax filling. I’m interested know about your service and get your expert assistance to file my return when i get my form 16. Its more complex process for me to do it myself. Is there any contact number to talk to experts.
Thanks,
Gugan
Hi @Gugan
If your income is doubly taxed than you can claim the credit of the same in your Income Tax Return based upon the DTAA between the countries. In order to claim the relief, you need to file Form 67 on IT Portal before the due date of filing the income tax return.
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Hi,
I come under RNON status. I am employed with UK and I am getting salary in pounds. Tax is already deducted in the UK by my UK employer.
For last financial year, I was working from India for more than a year.
My question is - Is my salary Indian sourced or foreign sourced? I understand that foreign income is not tax liable in India for RNOR. But considering I am working from India, does my salary income come under indian or foreign sourced?
If In case it comes under Indian sourced, should I need to pay double tax?
@Sakshi_Shah1 can you help ?
Hey @dipu
You must check your residential status in the financial year. If you’re a RBNOR (resident but not ordinary resident), following incomes are taxable:
- Income earned in India
- Income received in India
- Income earned abroad but received in India
- Income earned and received outside India
Thus, such income would be taxable in India. However, since you have already paid tax on such income in the UK, you can claim credit of such tax paid in the ITR as per the terms of the DTAA Agreement between India and UK.
You can read more about taxability of RBNOR here
Read more about DTAA agreement here
Hi thank you for your reply.
I was told that I am not eligible for DTAA or tax relief ( foriegn tax credit) because i stayed and worked more than 183 days in india even though I paid tax in the UK. Could you please clarify if that’s the case? Is it possible that that they enforce double taxation?
Thank you in advance.