Understanding Section 90 and 90A of the Income Tax Act
The Income Tax Act of India includes several provisions that enable taxpayers to claim relief from double taxation on their income. Section 90 and 90A of the Act are two such provisions that allow taxpayers to claim relief in cases where their income is taxed in both India and another country. Let’s take a closer look at these sections and understand how they work.
What is Section 90 of the Income Tax Act?
Section 90 of the Income Tax Act provides for relief from double taxation of income that arises in India and another country. This section applies to residents and non-residents of India who have paid taxes on their income in a foreign country with which India has entered into a Double Taxation Avoidance Agreement (DTAA). DTAA is a treaty between two countries to avoid double taxation of income that arises in both countries.
Under this section, taxpayers can claim relief from double taxation in the form of a tax credit or an exemption. The tax credit is provided for the amount of tax paid in the foreign country, while the exemption is provided for the income that has already been taxed in the foreign country.
What is Section 90A of the Income Tax Act?
Section 90A of the Income Tax Act provides for relief from double taxation of income that arises in India and a country with which India has not entered into a DTAA. This section applies only to residents of India who have paid taxes on their income in a foreign country with which India has not entered into a DTAA.
Under this section, taxpayers can claim relief from double taxation in the form of a tax credit. The tax credit is provided for the amount of tax paid in the foreign country.
Key Differences between Section 90 and 90A
- Applicability: Section 90 applies to both residents and non-residents of India, while Section 90A applies only to residents of India.
- Countries: Section 90 applies to countries with which India has entered into a DTAA, while Section 90A applies to countries with which India has not entered into a DTAA.
- Relief: Section 90 provides for both tax credit and exemption, while Section 90A provides only for tax credit.
- Scope: Section 90 is broader in scope as it applies to a larger number of taxpayers and countries.
Benefits of Section 90 and 90A
The primary benefit of Section 90 and 90A is that they help prevent double taxation of the same income in both India and a foreign country. This is especially helpful for businesses and individuals who operate in multiple countries and are subject to tax laws in each of those countries. By providing relief from double taxation, these sections help reduce the overall tax burden on taxpayers and promote international trade and commerce.
Another benefit of these sections is that they promote harmonization between India and other countries with which it has entered into DTAA. These treaties help ensure that taxpayers are not taxed twice on the same income and also promote mutual cooperation and understanding between the signatory countries.
How to Claim Relief under Section 90 and 90A
To claim relief under Section 90 and 90A, taxpayers need to file Form 10F with the Income Tax Department. This form is available online on the Income Tax Department’s website and must be filed along with the taxpayer’s income tax return. The form requires the taxpayer to provide details of the income earned in the foreign country, the tax paid in that country, and the tax relief claimed under Section 90 or 90A.
It is important to note that taxpayers must provide proof of tax payment in the foreign country to claim relief under these sections. This can be done by providing a certificate of tax payment issued by the foreign tax authority or any other document that shows proof of tax payment.
Conclusion
Double taxation can be a significant burden for taxpayers, and Section 90 and 90A of the Income Tax Act provide much-needed relief to taxpayers who earn income in India and another country. It is important for taxpayers to understand these provisions and take advantage of them to avoid paying taxes twice on the same income. However, it is advisable to seek professional advice before making any tax-related decisions to ensure compliance with the law.
Read more useful content:
- section 145 of income tax act
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- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
Who can claim relief under Section 90 and 90A of the Income Tax Act?
Ans: Both residents and non-residents of India who have paid taxes on their income in a foreign country can claim relief under Section 90, while only residents of India can claim relief under Section 90A.
What is a Double Taxation Avoidance Agreement (DTAA)?
Ans: DTAA is a treaty between two countries to avoid double taxation of income that arises in both countries.
What kind of relief is provided under Section 90 and 90A?
Ans: Taxpayers can claim relief from double taxation in the form of a tax credit or an exemption under Section 90, while only tax credit is provided under Section 90A.
Which countries are covered under Section 90 and 90A?
Ans: Section 90 applies to countries with which India has entered into a DTAA, while Section 90A applies to countries with which India has not entered into a DTAA.
Can a taxpayer claim relief under both Section 90 and 90A?
Ans: No, a taxpayer can claim relief under either Section 90 or 90A, depending on the country in which they have paid taxes.
What is Form 10F, and how is it filed?
Ans: Form 10F is a form that taxpayers need to file with the Income Tax Department to claim relief under Section 90 or 90A. It can be filed online along with the taxpayer’s income tax return.
What documents are required to claim relief under Section 90 and 90A?
Ans: Taxpayers must provide proof of tax payment in the foreign country, which can be done by providing a certificate of tax payment issued by the foreign tax authority or any other document that shows proof of tax payment.
Is it necessary to seek professional advice before claiming relief under Section 90 and 90A?
Ans: It is advisable to seek professional advice before making any tax-related decisions to ensure compliance with the law.
What is the benefit of claiming relief under Section 90 and 90A?
Ans: The primary benefit of claiming relief under these sections is that it helps prevent double taxation of the same income in both India and a foreign country, thus reducing the overall tax burden on taxpayers.
Can a taxpayer claim relief under Section 90 and 90A for the same income?
Ans: No, a taxpayer cannot claim relief under both sections for the same income. They must choose one section depending on the country in which they have paid taxes.
