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CMA Final · Direct Tax Laws and International Taxation · Double Taxation Avoidance Agreements (DTAA)

For unilateral relief under section 160 of the Income-tax Act, 2025, Mr. Rohan's total income is Rs 20,00,000 and Indian income-tax after reliefs under the Act but before relief under this Part is Rs 5,00,000. His foreign income of Rs 6,00,000 was assessed abroad as part of total foreign assessed income of Rs 8,00,000, on which tax actually paid there, before any double taxation relief there, was Rs 1,60,000. No agreement exists with that country. What is the relief?

The relief is Rs 1,20,000. The Indian rate is 25% (5,00,000/20,00,000) and the foreign rate is 20% (1,60,000/8,00,000). Section 160 uses the lower rate, 20%, on the doubly taxed income of Rs 6,00,000, which gives Rs 1,20,000.

  1. ARs 1,50,000
  2. BRs 1,20,000Correct
  3. CRs 1,60,000
  4. DRs 1,40,000

Explanation

Indian rate = 5,00,000 / 20,00,000 = 25%. Foreign rate = 1,60,000 / 8,00,000 = 20% (whole income assessed there). The lower is 20%, applied to the doubly taxed income of Rs 6,00,000, giving Rs 1,20,000. Using 25% gives Rs 1,50,000, which is wrong because the lower rate applies.

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