Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

HOW TO CALCULATE RELIEF U/S 90 OR 91

aruna thakur (accountant) (74 Points)

02 September 2009

HOW TO CALCULATE RELIEF UNDER SECTION 90, WHAT TREATY USE FOR THIS CALCULATION?

PLEASE ANY CALCULATOR OR CALCULATION TELL ME.

THANKS & REGARDS

ARUNA

Reply
Follow
Share

8 Replies

Ashish M (Chartered Accountant) (2731 Points)
Replied 03 September 2009

1. First include the income earned and taxed in the forieng country along with the income earned in india.

2. Then calculate tax on the Total income Above.

3. Now calculate average rate of tax.

4. Then multiply such rate with the income earned from foreign.country.

5. Deduct tax paid in the foreign country from the tax calculated in step. 4 above, .

Such amount is relief u/ s 90.

Eg. - In case of Resident individual.

Income earned in india = Rs500000

Income earned from foreign = 200000 (tax paid there = Rs.50,000)

1. Total income is = 500000 + 200000 = 700000

2. Tax calculated on 7,00,000/- is Rs. 118450/-

3. averge rate of tax is (118450 / 700000) = 16.92%

4.Calculate average tax on foreign income i.e. 200000 x 16.92% = Rs. 33840/-

5. TAx paid in foreign country is Rs. 50,000.

6. Hence relief u/s 90 is lower of 33840 and 50000, i.e 33.840/-

Therefore tax statement is,

TAx on total income = 118450

Less: relief u/s 90 = 33840

Tax payable 84610/-

3 Like

Upgrade to CAclubindia Pro. Subscribe Now!

Debashis Mandal (Business & Tax Consultancy) (341 Points)
Replied 03 September 2009

Respected Friend ARUNA & ASHISH

ARUNA u asked about Sec.90 ie Taxation of Income where DTAA exist, it is always possiable where 2 countries have a Bilateral Agreement between them, so in that case 2 things may happen - 1. whether such country has got any Bilateral Agreement with India or not, If they have then just go through such agreement & treat the tax matter as per the agreement, where tax is to be charged in India at a reduced rate which is called Tax Exemption Method or 2. u may have Tax Credit Method which is as fllows,

First Compute Total Income as per Income Tax Act 1961

Last from such Income so computed allow relief as per the terms of the Tax treaty.

Ashish, the soln. u given is v.good but as per my knowledge it is a treatment U/S 91 of Indian Income Tax Act. 1961 where u do not have a Bilateral Agreement & an unilateral agreement is followes & on that basis without any agreement with any other country a relief is given to the assessee as per the method u have shown to us.

I think reders r all superior brains then me so if any improvement is comming then I personally would be greatful to them.

Thanks to everyone.

Debashis

4 Like

SANTANU CHATTERJEE (PROFESSIONAL) (30 Points)
Replied 13 August 2010

Hi Ashis

Your note on the calculation of relief U/S 90 is of immense importance and help. A real useful post. I have a querry on this. I would like to ask it if you do not mind. I learnt from the officials of the IT Department that there is a procedure for calculating the same as follows:

(Indian Income/Global Income)*Tax paid in the foreign country

Considering your example of 5lacs & 2lacs the relief amt will come to be something around Rs. 14,286.00 on that basis.

Can you please throw some light on this? Does there exist any such formula?

Looking forward to hearing from you and/or any other tax expert

Regards

nishant maheshwari (office) (22 Points)
Replied 05 November 2012

Hello sir,

Good afternoon. if a individual in employment for 9 months and provides services to a US company for 3 months and get pay after reduction of taxes. how he get relief u/s 90, although he is resident in India during the A.Y. 2012-13. what will be the Tax treatment.

Pavan Kumar (Student CA IPC / IPCC) (91 Points)
Replied 03 October 2016

How you calculate tax on Rs.700,000/- taxable income for relief u/s 90 and 90A.

Upgrade to CAclubindia Pro. Subscribe Now!

Merin Mathews (4 Points)
Replied 25 February 2017

how to claculate sec 234c of AY15-16, if a person has not yet filed IT return and not paid tax?

Piyush Agrawal (Pursuing CA & CS Final & Doing Practice of Tax Consultants ) (45 Points)
Replied 21 March 2017

Hello Sir

As per your example for calculaiion of relief U/s 90 we have to take total taxable income which means after all deductions or before any deductions ?

Jaysingh (Income Tax GST Assessment Accounting finance) (39 Points)
Replied 02 July 2018

Can we use Exemption Method where A particular income is taxed in one of the both countries and exempted in the other country.. and both Countries have a DTAA.