Double taxation can be a major concern for individuals and businesses earning income in multiple countries. Fortunately, India offers provisions to help avoid paying tax twice on the same income. In this guide, we’ll break down how to claim double taxation relief in India, including eligibility, methods, documentation, and a step-by-step claim process.
🌍 What Is Double Taxation?
Double taxation occurs when a taxpayer is liable to pay tax on the same income in two different countries. This typically affects:
- NRIs (Non-Resident Indians)
- Indian residents with foreign income
- Multinational companies operating across borders
There are two types of double taxation:
- Jurisdictional Double Taxation – Same income taxed by two different countries.
- Economic Double Taxation – Two different taxpayers are taxed on the same income.
🤝 What Is Double Taxation Avoidance Agreement (DTAA)?
India has signed Double Taxation Avoidance Agreements (DTAAs) with over 90 countries, including the US, UK, Australia, Canada, UAE, and Germany. These treaties help ensure that:
- A taxpayer is not taxed twice for the same income.
- Tax credits or exemptions are provided.
📜 Legal Provisions Under Indian Income Tax Act
Section 90 and 90A of the Income Tax Act apply if there is a DTAA with the country.
Section 91 applies when there is no DTAA between India and the other country.
| Section | Applicability | Type of Relief |
|---|---|---|
| 90 | DTAA signed with foreign country | Bilateral |
| 90A | DTAA with specified territories | Bilateral |
| 91 | No DTAA in place | Unilateral |
✅ Who Is Eligible to Claim Double Taxation Relief?
You can claim DTAA relief if:
- You are a resident of India as per Indian tax law.
- You have earned income from a foreign country.
- That income has been taxed outside India.
- You have sufficient documentation such as Form 67, Tax Residency Certificate (TRC), and proof of foreign taxes paid.
✨ Methods of Claiming Double Taxation Relief in India
India offers two main methods of relief:
1. Exemption Method
- Used when income is taxable in only one country.
- The income is fully exempt in India.
- Example: Salary taxed in the UAE (with DTAA), not taxed again in India.
2. Tax Credit Method
- Used when income is taxed in both countries.
- You pay tax abroad and then claim credit in India.
- Only the difference between Indian and foreign tax rates needs to be paid.
| Method | Applicability | Example |
|---|---|---|
| Exemption | Income taxable only in one country | Rental income taxed only in Australia |
| Tax Credit | Income taxed in both countries | Salary income taxed in UK and India |
📊 Common Income Types Under DTAA
| Income Type | DTAA Applicability | Relief Method |
|---|---|---|
| Salary from abroad | Yes | Tax Credit |
| Interest income | Yes | Tax Credit |
| Dividend income | Yes | Tax Credit |
| Capital gains | Yes | Depends on DTAA |
| Pension income | Yes | Tax Credit |
🧾 Required Documents for Claiming Relief
To claim double taxation relief in India, you will need:
- Form 67 – Mandatory to file for claiming foreign tax credit.
- Tax Residency Certificate (TRC) – Issued by the foreign tax authority.
- Proof of Income – Salary slips, rental agreements, dividend statements.
- Proof of Foreign Taxes Paid – Tax returns or payment receipts.
- DTAA Declaration – Self-declaration referencing the applicable DTAA.
🛠️ How to Claim Double Taxation Relief: Step-by-Step
Step 1: Determine Your Residential Status
Check your residency status under Section 6 of the Income Tax Act. Only residents are eligible to claim DTAA relief.
Step 2: Check Applicable DTAA
Refer to the DTAA between India and the foreign country. Understand which income is covered and the applicable relief method.
Step 3: Collect Required Documents
Gather all documents listed above, especially Form 67 and TRC.
Step 4: File Form 67
Submit Form 67 online through the income tax portal before filing your ITR. This form provides details of:
- Foreign income
- Taxes paid abroad
- DTAA relief claimed
Step 5: File Your ITR
- Report foreign income in ITR.
- Claim the tax credit/exemption in the relevant column.
- Attach all supporting documents electronically.
Step 6: Maintain Records
Keep a physical and digital record of all documents for at least 6 years.
🧮 Example of DTAA Relief Calculation
Let’s say an Indian resident earns ₹10,00,000 salary in the US, and the US tax withheld is ₹2,00,000. Suppose the Indian tax liability on the same income is ₹2,80,000.
| Particulars | Amount (₹) |
|---|---|
| Foreign income | 10,00,000 |
| Tax paid in US | 2,00,000 |
| Tax payable in India | 2,80,000 |
| Tax credit claimed (under DTAA) | 2,00,000 |
| Net tax payable in India | 80,000 |
So, the taxpayer only pays ₹80,000 more in India after claiming DTAA relief.
⚠️ Key Points to Remember
- Form 67 must be filed before ITR to claim tax credit.
- Tax credit cannot exceed Indian tax liability on the same income.
- Mismatch in documentation can lead to disallowance.
- The TRC is mandatory for DTAA benefit.
🌐 Countries with DTAA with India (Partial List)
| Country | DTAA Signed |
|---|---|
| United States | Yes |
| United Kingdom | Yes |
| Canada | Yes |
| Australia | Yes |
| UAE | Yes |
| Singapore | Yes |
| Germany | Yes |
| France | Yes |
| South Africa | Yes |
You can find the full list on the Income Tax Department’s website.
🧑⚖️ What If There Is No DTAA?
Even if no DTAA is signed, you can still claim unilateral relief under Section 91 of the Income Tax Act. You’ll need:
- Proof of foreign income
- Foreign tax payment receipts
Note: Relief under Section 91 is generally lower than DTAA-based relief.
📉 Consequences of Not Claiming DTAA
- Double taxation: You may end up paying higher taxes.
- Lower net income: Especially impactful for freelancers and remote workers.
- Penalties: Incorrect filings can lead to penalties and legal issues.
- No refund: You may miss out on possible refunds from Indian tax authorities.
📌 Tips for NRIs and Expats
- Always check the DTAA before accepting foreign employment.
- Open NRO/NRE accounts for better tax management.
- Use services of tax professionals for complex filings.
- Maintain detailed records of all transactions and taxes paid.
✍️ Conclusion
Understanding how to claim double taxation relief in India is essential for global professionals, NRIs, and businesses with international operations. With proper documentation, Form 67 filing, and awareness of DTAAs, you can avoid paying tax twice and ensure compliance with Indian tax law. When in doubt, always consult a tax advisor.
🔎 FAQs
1. Is Form 67 mandatory for DTAA?
Yes, as per Rule 128 of the Income Tax Rules, Form 67 is mandatory for claiming foreign tax credit.
2. Can I claim DTAA relief if I am a non-resident?
No, only residents of India are eligible for relief under DTAA.
3. Is DTAA applicable to freelancers and consultants?
Yes, DTAA applies to freelancers and consultants if they pay taxes in foreign countries.
4. Where do I file Form 67?
Form 67 must be filed online through the income tax e-filing portal.