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CS Professional · Advanced Direct Tax Laws and Practice · Double Taxation Avoidance Agreement (DTAA)

Ramesh, a resident in India, earned foreign income in Country X, with which India has no agreement under section 159. Under the Income-tax Act, 2025, what is the relief available to him under section 160?

Under section 160, a resident in India gets a deduction from Indian income-tax on the doubly taxed foreign income, computed at the Indian rate of tax or the foreign country's rate, whichever is lower. It is a tax credit style relief, not an exemption.

  1. ADeduction from Indian tax on the doubly taxed income at the Indian rate or the foreign rate, whichever is lowerCorrect
  2. BDeduction from Indian tax at the Indian rate or the foreign rate, whichever is higher
  3. CComplete exemption of the foreign income from Indian tax
  4. DDeduction of the foreign tax from total income before computing Indian tax, at the higher rate

Explanation

Section 160(1) gives a deduction from the Indian income-tax payable, calculated on the doubly taxed income at the lower of the Indian rate and the foreign rate (or the Indian rate if equal). Higher-rate and exemption options are not provided.

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