DTAT |
4.1.Types of relief:
Relief from double taxation can be provided mainly in two ways (i) Bilateral relief (ii) Unilateral relief.
(i) Bilateral relief: Under this method, the Governments of two countries can enter into an agreement to provide relief against double taxation by mutually working out the basis on which relief is to be granted.
India has entered into agreement for relief against or avoidance of double taxation with 77 countries up to
May,2010.
Bilateral relief may be granted in either one of the following methods:
(a) Exemption method, by which a particular income is taxed in only one of the two countries; and
(b) Tax relief methods under which, an income is taxable in both countries in accordance with the respective tax laws read with the Double Taxation Avoidance Agreements. However, the country of residence of the taxpayer allows him credit for the tax charged thereon in the country of source.
In India, double taxation relief is provided by a combination of the two methods.
(ii) Unilateral relief :
This method provides for relief of some kind by the home country where no mutual agreement has been entered into between the countries.
4.2. Double Taxation Relief Provisions under the Act:
Section 90 and 91 of the Income Tax Act, 1961 provides for double taxation relief in India.
4.2.1.Agreement with foreign countries or specified territories –Bilateral Relief [Section 90]:
(i) Section 90(1) provides that the Central Government may enter into an agreement with the Government of any country outside India or specified territory outside India-
(a) for granting of relief in respect of –
(i) income on which income tax has been paid both in India and in that country or specified territory; or
(ii) income tax chargeable under this Act and under the corresponding law in force in that country or specified territory to promote mutual