1. Relief from double taxation for individuals with overseas income, corporates

Relief from double taxation for individuals with overseas income, corporates

In what could give relief from double taxation to corporates as well as individuals with overseas income, the Central Board of Direct Taxes (CBDT)...

By: | New Delhi | Updated: April 19, 2016 8:49 AM
tax collection, tax collection target, indirect taxes, total tax collection, arun jaitley, budget 2016 In the draft rules for grant of FTC, the CBDT proposed that Indian taxpayers could also offset taxes paid overseas against their domestic minimum alternate tax (MAT) liability. (Reuters)

In what could give relief from double taxation to corporates as well as individuals with overseas income, the Central Board of Direct Taxes (CBDT) on Monday issued draft guidelines under which Indian taxpayers would be allowed to claim foreign tax credit (FTC) against their domestic tax, cess and surcharge liability.

In the draft rules for grant of FTC, the CBDT proposed that Indian taxpayers could also offset taxes paid overseas against their domestic minimum alternate tax (MAT) liability.

The board has sought public comments on the proposed guidelines until May 2, 2016.

“The credit for foreign tax shall be available against the amount of tax, surcharge and cess payable under the Act  but not in respect of  any sum payable by  way of interest, fee or penalty,” according to the draft rules.

Tax experts said the draft rules could provide clarity and certainty. “This draft is a well-thought out move to clarify the nature and conditions for availability of FTC to Indian taxpayers,” said Sudhir Kapadia, National Tax Leader, EY India.

In the Budget in 2015, an enabling provision was introduced to notify rules in respect of granting FTC. However, the framing of rules, that would give certainty on these aspects, were delayed.

Absence of such regulations hindered the claim of such pre-paid taxes, leading to disallowance of foreign tax credits, often, on frivolous grounds, which was not in the spirit of double taxation avoidance agreements (DTAA). Tax payers could also claim FTC even for the taxes paid in countries with whom India does not have a tax avoidance pact.

However, no credit  would be available in respect of any amount of foreign tax which is disputed in any manner by the assessee, the CBDT draft said. Also, the tax payers would have give required proofs of foreign taxes paid to Indian authorities.

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