Income Tax (18th amendment) Rules, 2016
The Rule shall come into force
from 1st April 2017. The Rule 128 shall be inserted after rule 127
under Income tax Rules, 1962.
Rule 128 (Foreign Tax Credit)
The rule is about credit for the amount of foreign tax paid by the
resident assesse.
Ø Credit
of foreign tax paid shall be allowed only to resident assesse.
Foreign tax
shall be paid by the assesse in a country or specified territory outside India.
Credit of
foreign tax paid shall be allowed by way of deduction or otherwise.
Credit of foreign
tax shall be allowed in the year in which the corresponding income for such tax
has been offered to tax or assessed to tax in India. Where the income
corresponding to foreign tax has been offered to tax or assessed more than one
year, credit of foreign tax shall be allowed across those years in the same
proportion in which income assessed.
Ø Definition of countries for which tax
credit has been allowed under this rule:
Countries or
specified territory outside India: with which India has entered into an
agreement for the relief or avoidance of double taxation of income in terms of
section 90 or section 90A, the tax covered under the said agreement.
Other country or
specified territory outside India: in respect of which the tax payable under
the law in force in the nature of income-tax referred to in clause (iv) of the
Explanation to section 91.
Ø The
foreign tax credit under this rule shall be allowed against the amount of tax,
surcharge and cess payable but in respect of any sum payable by way of
interest, fee or penalty.
Ø Tax
credit under this rule shall not be allowed in respect of any foreign tax which
is in dispute. Where the dispute regarding foreign tax is finally settled ,the
credit of such tax shall be allowed in the year in which the income
corresponding to disputed tax is offered to tax or assessed in India, provided that the assesse within
six months from the end of the month in which the dispute is finally settled,
furnishes evidence of settlement of dispute and an evidence to the effect that
the liability for payment of such foreign tax has been discharged by him and
furnishes an undertaking that no refund in respect of such amount has directly
or indirectly been claimed or shall be claimed.
Ø The
credit of foreign tax shall be the aggregate of the amount of credit computed separately
for each source of income arising from a particular country or specified territory
outside India and shall be given effect to in the following manner :-
(i) The credit shall be lower of the
Tax payable under the act
Or
Foreign tax paid
Where foreign tax paid exceeds the amount of tax
payable in accordance with the provision of the agreement for relief or
avoidance of double taxation, such excess shall be ignored.
(ii) Conversion rate of currency for determination
foreign credit shall be the telephonic buying rate on the last date of the
month immediately preceding the month in which tax has been paid or deducted.
Ø In
respect of tax payable under section 115JB or section 115JC, the credit of
foreign tax shall be allowed against such tax in the same manner as is allowed
against any tax payable under the provision of the Act other than under the
provision of said sections (Normal provisions).
Ø Where
the amount of foreign tax credit under the section 115JB or section 115JC
exceeds the amount of tax credit available against the normal provisions, then
while computing tax credit (under section 115JAA or section JD), such excess
shall be ignored.
Ø Assesse
required to be submit following documents in order to claim foreign tax credit
(i)
A statement of income in verified form number
67.
(ii) Certificate or statement specifying the nature
of income and amount of tax deducted or paid by the assesse
(a)
Issued by the tax authority of the country or
specified territory outside India.
(b)
Issued by the person responsible for deduction
of tax at source.
(c)
Signed by the assesse, accompanied by
(I) an acknowledgment of online payment or bank
counter foil or challan for payment of tax where the payment has been made by
the assesse.
(II) proof of deduction where the tax has been
deducted.
Ø The
above mentioned statements required in order to claim tax credit shall be
furnished by the assesse on or before the due date for furnishing the return of
income (section 139(1)), in the manner specified for furnishing such return of
income.
Ø Form
No.67 shall also require to be furnished in case of carry backward of loss of
the current year results in refund of foreign tax for which credit has been
claimed in any earlier previous or years.
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