Section 90 of the Income Tax Act: Relief from Double Taxation

Introduction

In today’s globally connected economy, individuals and businesses frequently earn income from more than one country. This can create situations where the same income is taxed by multiple jurisdictions—a problem known as double taxation. To address this, India has put in place several safeguards under the Income Tax Act, 1961.

One of the most important provisions is Section 90, which governs Double Taxation Avoidance Agreements (DTAAs) that India enters into with other nations. These agreements ensure that taxpayers do not pay tax on the same income twice and provide clarity on how taxation rights are shared between countries.

This article offers a comprehensive overview of Section 90, including its purpose, scope, and advantages. Avoid paying taxes twice—get expert assistance with your ITR filing through Auriga Accounting pvt. ltd. today!

What is Section 90 of the Income Tax Act?

Section 90 of the Income Tax Act provides relief from double taxation to Indian residents by either allowing a credit for taxes paid in a foreign country or exempting certain incomes from tax in India. This relief becomes applicable when India has entered into a Double Taxation Avoidance Agreement (DTAA) with another country. These agreements ensure that taxpayers do not pay tax twice on the same income, avoiding unnecessary financial burden.

For more insights, read our guide on Double Taxation Relief – Sections 90, 90A, and 91 of the Income Tax Act.

Purpose of Section 90

The primary objective of Section 90 is to prevent double taxation and promote international trade, investment, and economic cooperation. By eliminating the risk of dual taxation, it enables individuals and businesses to engage in cross-border activities with greater confidence and clarity.

Key Provisions of Section 90

1. Relief Methods Under DTAA

Section 90 provides two main mechanisms for avoiding double taxation:

Exemption Method:
Income taxed in one country is completely exempt from tax in the other.
Credit Method:
The tax paid in one country is allowed as a credit against the tax payable on the same income in the other country, reducing the overall tax burden.

2. Applicability

Section 90 applies to Indian residents earning income from a country with which India has a DTAA. It covers various types of income, including:

Salaries
Business profits
Dividends
Interest
Royalties
Capital gains

3. Determining Residency

DTAAs include a tie-breaker rule to determine the tax residency of individuals who may qualify as residents of both countries. This ensures clarity on which country has the right to tax the individual.

4. Mutual Agreement Procedure (MAP)

Section 90 allows taxpayers to seek resolution under MAP when they believe taxation in one or both countries is not in line with the DTAA. The competent authorities of each country work together to address and resolve the dispute fairly.

How to Claim Relief Under Section 90

To claim DTAA relief, taxpayers must follow these steps:

1. Obtain a Tax Residency Certificate (TRC)

A TRC from the foreign tax authority is mandatory to establish residency in the partner country.

2. File Form 67

Form 67 must be filed along with the income tax return. It contains details of foreign income, taxes paid abroad, and the relief claimed.

3. Submit Supporting Documents

This includes the TRC, foreign tax payment proofs, and other relevant documents required to substantiate the claim.

4. Compute the Foreign Tax Credit

The FTC is calculated based on foreign taxes paid and Indian tax liability. The credit is limited to the lower of the two.

5. Claim Relief in the Income Tax Return

Once Form 67 and all supporting documents are submitted, the taxpayer can claim the relief, which will reflect in the final tax computation.

Understanding Form 67 Under the Income Tax Act

Form 67 is essential for claiming Foreign Tax Credit (FTC) under Sections 90, 90A, and 91. It must be filed whenever foreign income subjected to tax abroad is also taxable in India.

When to File Form 67?

As per CBDT rules:

Form 67 must be submitted on or before the end of the relevant assessment year, provided the ITR is filed within the due dates under Section 139(1) or 139(4).
For updated returns filed under Section 139(8A), Form 67 must be submitted on or before the filing date of the updated return.
Missing this deadline disqualifies the taxpayer from claiming FTC.

Recent Amendments

Effective April 1, 2022, revised guidelines mandate timely filing of Form 67 for all FTC claims from FY 2022–23 onwards.

Benefits of Section 90

Avoidance of Double Taxation: Prevents taxpayers from being taxed twice on the same income.
Boosts International Trade & Investment: Offers clarity and predictability for cross-border transactions.
Enhances Compliance: A structured process encourages voluntary compliance.
Efficient Dispute Resolution: MAP allows quick and fair settlement of cross-border tax disputes.

Examples of Section 90 in Practice

1. Individual with Foreign Salary Income

Mr. A, an Indian resident, earns a salary from a U.S.-based company and pays tax in the United States. Under the India–USA DTAA, he can claim a credit for the U.S. tax paid when filing his Indian tax return.

2. Business with Overseas Operations

ABC Ltd., an Indian company, operates a branch in the U.K. The branch’s profits are taxed in the U.K. Under the India–U.K. DTAA, the company can claim credit for U.K. taxes paid against its Indian tax liability on the same income.

About the Author

Vinod

Vinod is an experienced legal writer who translates complex legal concepts into clear, actionable insights. He empowers entrepreneurs to understand their legal responsibilities and build confident, compliant, and sustainable businesses.

February 1, 2026