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Taxation Query

(Guest)

One of my client is leaving for USA for 12 months(approx). For the AY 2010-2011, he will be in India for 7 months and 5 months in USA. Similarly he will be in USA for 7 months and return back to India in the AY 2011-2012. He will be liable to pay tax in both the countries since he satisfies residential requirements in both the countries. He will get credit of whatever tax he pays in USA in India since there is DTAA btw India and USA.

My question is if the tax paid in USA is more than that paid in India, then is he eligible to get refund in India? If yes then which govt will pay the refund? Also is there any other alternative? Thanks in advance.

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15 Replies

(Guest)

Somebody please reply.

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CA.Tarun Maheshwari (CA, DISA) (7150 Points)
Replied 22 September 2009

As far as my information is concerned, the benefit can be claimed maximum upto the tax payable in residence country. He can not claim refund for tax deducted in another country.

GAURAV AGARWAL (CA FINAL) (76 Points)
Replied 22 September 2009

i think that ,as the tax paid in USA is exceeding Indian tax then the concerned person will not require to pay any tax in India ,but likewise excess so paid shall be allowed to get adjusted in next year just like Mat credit

CA.Tarun Maheshwari (CA, DISA) (7150 Points)
Replied 22 September 2009

No, I am not agree with this view. Credit is allowed only in case of MAT in whole of the Income tax. You can not adjust any tax into next year under Income Tax Act.

Juzer Sadikot (CA - innovative solutions for Imports and Exports) (1309 Points)
Replied 22 September 2009

Hello Poonam,

Yes there is Indo-US DTAA and he can definetly claim benifits of taxes paid/deducted in respective countries.

For your reference, I am attached DTAA between India and US.

Plz write to me if you want any thing more,

Thanks

Attached File : 52 indo us dtaa.pdf downloaded: 263 times

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Sunil (Trader) (2611 Points)
Replied 22 September 2009

Both governments have a right to tax the salary income as per the DTAA as you are resident in both countries but USA being the source has witheld its entire portion of tax due.

Now you have to offer the salary for taxation to India Govt. India Govt will calculate its own tax on that salary as well as your other worldwide income including India. If the amount deducted in USA is higher than the tax in India, matter is closed and you get nothing. If it is lower than the tax in India, you have to pay the difference to the Indian Govt. You only get relief in these matters, not refund.

Be especially careful about income from immovable properties in USA and India. If he has given property on rent in India and has income earning assets in India, it may get taxed at USA while he is resident there and he will have to seek relief on taxes paid or witheld in India on such incomes.

Sunil (Trader) (2611 Points)
Replied 23 September 2009

Do remember that for purpose of relief the Indian Government will consider USA taxes witheld only against the indian income tax on the income from USA on which tax is witheld. If tax is witheld on salary then the relief is given only on the salary. If tax is witheld on interest or dividends, then relief is given only on the tax calculated on the interest or dividends. In case of business receipts in USA (commission business or any business in USA), only USA has the right to tax that irrespective of residential status if it is accrued from business in USA. That will not form part of the Indian Income as per DTAA. However, if he has rendered technical services (incl. managerial) while in USA, both governments have right to tax it and accordingly relief will be given. In case tax was not witheld in USA for items where both countries have right to tax and you pay the tax yourself to the USA govt., you will be entitled to relief against that payment also (like what we call self assessment tax here). However, ONLY RELIEF, NO REFUND.

Anup rathi (CA FINAL) (268 Points)
Replied 23 September 2009

According 2 my knowledge the person will get the benefit of refund in d country in which he is resident at the time of filing the return 1 cannot take advantageof xcess tax paid in other country in the resident country in wich he is filing the return of income

bhavik mehta (C.A.) (526 Points)
Replied 23 September 2009

its better to concern C.A. if any oline

practicing in such special cases

Vikas (Student) (129 Points)
Replied 23 September 2009

refund can be claim only in that country in which he pays tax....

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(Guest)

Thanks for all valuable replies

dipak ( ca final student) (427 Points)
Replied 23 September 2009

Hello Poonam,

Yes there is Indo-US DTAA and he can definetly claim benifits of taxes paid/deducted in respective countries.

For your reference, I am attached DTAA between India and US.

Plz write to me if you want any thing more,

Thanks

Attached File : 52_indo_us_dtaa.pdf downloaded 25 times

(Guest)

Thanks a lot

chirag (Asst. Accounts Manager) (30 Points)
Replied 23 September 2009

Dear Sir,

This is regarding to service tax paid on freight inward @ 10.3 % on 25% of freight value after taking75% abatement then we availed cenvat credit for the same & if availed cenvat credit so against which notification or circulars?