Tag: Circulars and Notifications(Income Tax)

Rule for tax credit of foreign taxes. Rule 128 inserted vide Notification dated 27-06-2016

1. Rule is applicable to resident assesses only.
2. Credit to be allowed for foreign taxes.
3. Credit of only those foreign taxes are allowed which are paid in country with which India has DTAA or TIEA.
4. Credit of Foreign taxes to be allowed only if they have been paid whether  by way of tax deduction or otherwise
5. Credit to be allowed by converting foreign tax into Indian Currency  at TT buying rate on last day of month immediately preceeding the month in which tax has been paid or deducted.
6. Credit shall be allowed to the extent of Income corresponding to tax is offered to tax in India
7. Where income on which foreign taxes are paid is reflected in multiple years, credit of taxes shall be allowed proportionately.
8. Credit of foreign taxes can be adjusted against tax , surcharge and cess payable under the Act
9. Credit of foreign taxes can not be adjusted against interest, fee or penalty.
10. Where the levy of foreign tax is disputed by the assessee, no credit of foreign taxes to be allowed
11. a) Where dispute is finally setteled, credit of foreign tax can be allowed if With in six months from the end of month in which dispute is finally settled:
12. b) Assessee furnishes evidence of settlement of dispute and
13. c) Assessee also furnishes evidence that liability for payment of foreign taxes has been discharged by him  and
14. d) Assessee furnishes an undertaking that no refund directly or indirectly has been claimed or shall be claimed in respect of such amount
15. Credit of tax to be computed by aggregating taxes paid for each source of income from a particular country.
16. Credit shall be allowed at lower of the tax payable under the Act and foreign tax
17. Where foreign tax paid is more than payable under DTAA or tax relief, then excess shall be ignored.
18. Where income of resident assessee is computed under special provisions u/s 115JB or S.115JC, credit of foreign tax shall be allowed against MAT /AMT as it allowable against tax payable under  normal provisions.
19. Following document to be furnished for availing credit of foreign taxes:
20. a) Statement in F. 67 specifying detail of income from foreign country and foreign taxes claimed
21. b) Certificate from tax authority of foreign country specifying the nature of income and tax deducted/paid  OR  Such certificate from deductor or Self Signed Certificate [In case of self signed certificate , the certificate to accompany an acknowledgement of online payment or bank counter foil or challan for payment of tax, where payment has been made the assessee  and proof of tax deduction]
22. Documents/Certificate regarding foreign taxes to be furnished before due date of furnishing of return u/s 139(1).