A taxpayer may sometimes be required to pay tax on the same income in India and another country. This can happen when income is earned outside India but is also taxable in India because of the taxpayer's residential status.

Sections 90, 90A and 91 of the Income-tax Act, 1961 provide mechanisms for eliminating or reducing such double taxation. Relief may be available under a Double Taxation Avoidance Agreement, commonly referred to as a DTAA, or directly under Indian tax law where no applicable agreement exists.

What is double taxation?

Double taxation occurs when the same income is taxed in two countries:

1. Source country: The country in which the income arises or is earned.
2. Residence country: The country in which the taxpayer is considered a tax resident.

For example, an individual who is resident and ordinarily resident in India may earn salary, interest, dividend, consultancy income or capital gains from another country. The foreign country may tax the income because it arises there, while India may also tax it as part of the individual's global income.

Difference between Sections 90, 90A and 91

Relief under Section 90

Section 90 authorises the Central Government to enter into an agreement with another country or specified territory for:

• Granting relief where income is taxed in both countries
• Avoiding double taxation
• Promoting mutual economic relations, trade and investment
• Exchange of tax-related information
• Preventing tax evasion and avoidance
• Recovery of taxes

Where a DTAA applies, the taxpayer should compare the provisions of the Income-tax Act with the applicable treaty. The provision that is more beneficial to the taxpayer generally applies, subject to the applicable anti-avoidance provisions.

How is relief provided under Section 90?

The applicable DTAA may remove double taxation through one of the following methods.

1. Exemption method

Under the exemption method, the residence country exempts the foreign income, subject to the conditions of the applicable treaty.

2. Foreign tax credit method

Under the foreign tax credit method, the foreign income is included in taxable income in India. Credit is then allowed for the eligible tax paid in the foreign country.

The method and amount of relief depend on the relevant DTAA, the nature of income, the applicable treaty article and the foreign tax credit rules.

DTAA benefit for a non-resident

A non-resident claiming a benefit under a DTAA is generally required to obtain a Tax Residency Certificate from the government of the country or territory of residence. The taxpayer may also be required to provide the prescribed information, including Form 10F where applicable.

Depending on the treaty, a non-resident may be eligible for an exemption or a restricted tax rate on income such as interest, royalty, fees for technical services or dividend, subject to the treaty conditions.

Relief under Section 90A

Section 90A applies where:

• A specified association in India enters into an agreement with a specified association in a specified territory outside India; and
• The Central Government adopts and implements the agreement through a notification in the Official Gazette.

A specified association may be an institution, association or body functioning under Indian law or the law of the specified foreign territory and notified for this purpose.

Where the notified agreement applies, the provisions that are more beneficial to the eligible taxpayer generally apply, subject to applicable anti-avoidance provisions.

Section 90A is less commonly used than Section 90. However, its objective is similar: granting relief from double taxation and providing a framework for information exchange, tax recovery and prevention of tax avoidance.

Relief under Section 91

Section 91 provides unilateral relief where a resident taxpayer has paid tax on foreign income in a country with which India does not have an agreement under Section 90 for relief or avoidance of double taxation.

The taxpayer must generally establish that:

• The taxpayer was resident in India for the relevant previous year
• The income accrued or arose outside India
• The income was not deemed to accrue or arise in India
• The same income was included in taxable income in India
• Tax was paid or deducted in the foreign country
• No agreement under Section 90 covered the foreign country

How is relief under Section 91 calculated?

Relief is calculated on the doubly taxed income at:

• The Indian rate of tax
• The rate of tax of the foreign country

whichever is lower. Where both rates are equal, relief is allowed at the Indian rate of tax.

For this purpose, the Indian rate is broadly the average Indian tax rate, calculated by dividing the relevant Indian income tax by the taxpayer's total income. The foreign-country rate is based on the foreign tax actually paid, after applicable foreign reliefs, divided by the income assessed in that country.

Example of relief under Section 91

Assume that an Indian resident earns foreign consultancy income of ₹5,00,000 from a country with which India has no agreement under Section 90.

Relief is calculated using the lower rate:

₹5,00,000 × 15% = ₹75,000

The taxpayer may therefore claim relief of ₹75,000, subject to satisfaction of the statutory conditions and prescribed filing requirements.

If the foreign tax rate were 25% while the Indian average rate remained 20%, relief would ordinarily be restricted to ₹1,00,000, being the amount calculated using the lower Indian rate.

Foreign tax credit rules for AY 2026-27

For income earned during FY 2025-26 and reported in the return for AY 2026-27, Rule 128 of the Income-tax Rules, 1962 governs the foreign tax credit mechanism for resident taxpayers.

Important conditions include:

• Credit is allowed in the year in which the corresponding foreign income is offered to tax or assessed to tax in India.
• Where the income is taxed in India over more than one year, the credit is allocated proportionately.
• Credit is calculated separately for each source of income from each foreign country or specified territory.
• Credit is restricted to the lower of the eligible foreign tax and the Indian tax payable on the same income.
• Foreign tax exceeding the tax permitted under the applicable DTAA is ignored.
• Credit may be adjusted against income tax, surcharge and cess, but not against interest, fees or penalties.
• Credit is generally not available for foreign tax disputed by the taxpayer until the dispute is settled and the prescribed documents are furnished.
• Foreign tax is converted into Indian currency using the prescribed telegraphic transfer buying rate.

Form 67 requirement for AY 2026-27

For FY 2025-26 and AY 2026-27, a resident taxpayer claiming foreign tax credit must continue to use:

• Sections 90, 90A or 91 of the Income-tax Act, 1961;
• Rule 128 of the Income-tax Rules, 1962; and
• Form 67 for claiming foreign tax credit.

Form 67 must be furnished electronically through the Income Tax e-Filing portal.

Reporting the relief in the income-tax return

A taxpayer claiming foreign tax relief should generally report:

• The foreign income under the relevant head of income in the income-tax return;
• Country-wise foreign income and tax details in Schedule FSI;
• The country-wise summary of relief in Schedule TR; and
• Foreign assets and related income in Schedule FA, wherever applicable.

Schedule FSI applies to resident taxpayers and captures income arising from sources outside India. Schedule TR summarises the relief claimed under Section 90, Section 90A or Section 91.

Schedule FA is generally relevant to a resident and ordinarily resident taxpayer having reportable foreign assets or accounts. It is not required merely because a person is non-resident or resident but not ordinarily resident.

Documents to retain for claiming foreign tax relief

The taxpayer should retain the following records, as applicable:

• Form 67 acknowledgement
• Foreign income-tax return or assessment document
• Foreign tax payment challan or receipt
• Foreign withholding-tax certificate
• Certificate or statement issued by the foreign tax authority or payer
• Salary slips, dividend statements, interest certificates or capital-gain statements
• Bank statements showing receipt of foreign income
• Tax Residency Certificate, where applicable
• The relevant DTAA and applicable treaty article
• Working of foreign income converted into Indian currency
• Working of Indian tax attributable to the foreign income
• Details of any foreign tax refund or disputed foreign tax

Rule 128 permits the supporting certificate or statement to be obtained from the foreign tax authority, the person responsible for deducting the tax or, subject to the prescribed supporting proof, through a statement signed by the taxpayer.

Income-tax Act, 2025: Corresponding provisions

The Income-tax Act, 2025 came into force on 1 April 2026. However, income earned during FY 2025-26 continues to be governed by the Income-tax Act, 1961 and is reported for AY 2026-27.

Income earned from 1 April 2026 onwards is governed by the Income-tax Act, 2025 and is referred to by the corresponding Tax Year.

Form 44 under the Income-tax Rules, 2026

For income arising during Tax Year 2026-27 and subsequent tax years governed by the Income-tax Act, 2025:

• Rule 76 replaces Rule 128 for foreign tax credit purposes
• Form 44 replaces Form 67
• Form 45 is used for the prescribed intimation after settlement of disputed foreign tax for which credit was not earlier claimed

Form 44 must generally be furnished within 12 months from the end of the relevant tax year, provided that the return was furnished within the permitted time. For foreign income included in an updated return, Form 44 must be furnished on or before the date of filing the updated return.

Verification of Form 44 by an accountant is required:

• Where the taxpayer is a company
• In any other case where foreign tax paid outside India for the tax year equals or exceeds ₹1,00,000

Common mistakes to avoid

1. Claiming relief without reporting the foreign income

Foreign tax credit cannot ordinarily be claimed unless the corresponding foreign income is included or assessed to tax in India.

2. Selecting Section 91 despite an applicable DTAA

Where India has an applicable agreement with the foreign country, the relief should ordinarily be examined under Section 90 and the relevant treaty.

3. Claiming the entire foreign tax without applying the Indian tax limit

Foreign tax credit is generally restricted to the lower of the eligible foreign tax and the Indian tax payable on the same income.

4. Ignoring the treaty rate

Where foreign tax paid exceeds the amount permitted under the applicable DTAA, the excess may be ignored while calculating foreign tax credit.

5. Completing only Schedule FSI or Schedule TR

The ITR schedules and Form 67 are separate compliance requirements. Completing Schedule FSI or Schedule TR does not replace Form 67.

6. Using Form 44 for AY 2026-27

Form 44 applies to the new Act framework from Tax Year 2026-27. The AY 2026-27 return for FY 2025-26 continues to use Form 67.

7. Immediately claiming disputed foreign tax

Disputed foreign tax is generally not eligible for credit until the dispute is settled and the prescribed evidence, payment proof and undertaking are furnished.

8. Ignoring foreign-asset reporting requirements

Claiming foreign tax credit does not replace the separate requirement to disclose foreign assets or foreign accounts in Schedule FA, wherever applicable.

Practical takeaways

• Use Section 90 where an applicable government-level DTAA exists.
• Use Section 90A where a notified agreement between specified associations applies.
• Use Section 91 where the conditions for unilateral relief are satisfied.
• Include the foreign income in the Indian return before claiming foreign tax credit.
• Restrict the credit to the amount permitted under Indian law and the applicable treaty.
• For AY 2026-27, file Form 67 and complete Schedules FSI and TR.
• Complete Schedule FA separately wherever foreign-asset disclosure is applicable.
• For Tax Year 2026-27 under the Income-tax Act, 2025, examine Rule 76 and Form 44.
• Maintain country-wise and source-wise calculations and supporting documents.

Conclusion

Sections 90, 90A and 91 protect taxpayers from bearing an unrestricted tax burden in India and another country on the same income. However, the availability and amount of relief depend on the taxpayer's residential status, the country involved, the applicable DTAA, the nature of income, the eligible foreign tax and compliance with the prescribed reporting requirements.

For AY 2026-27, taxpayers must continue to claim relief under Sections 90, 90A or 91 of the Income-tax Act, 1961 using Form 67. For income arising during Tax Year 2026-27, the corresponding provisions are Sections 159 and 160 of the Income-tax Act, 2025, read with Rule 76 and Form 44.

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