India’s Central Board of Direct Taxes (CBDT) issued the draft rules: F. No. 142/24/2015-TPL, concerning the foreign tax credit and specifying the procedure for granting relief for income taxes paid in another country of foreign territory.
As per Section 295(2) (ha) of the Income-tax Act, 1961 (the Act) the Central Board of Direct Taxes (CBDT) may prescribe rules specifying the procedure for the granting of relief or deduction under Section 90, 90A or 91 of the Act of any income-tax paid in any country or specified territory outside India, against the income-tax payable under the Act. Therefore, the CBDT had set up a committee to suggest the methodology for grant of Foreign Tax Credit (FTC). After due consideration of the issues raised by various stakeholders, the committee submitted its report on 18 April 2016.
The Draft rule proposes the following procedure for grant of foreign tax credit in certain situations:
-No credit shall be available in respect of any amount of foreign tax which is disputed in any manner by the taxpayer;
– Foreign tax credit shall not be available against the amount of interest, fee or penalty; and
-I In the case where any tax is payable under the provisions of Minimum Alternate Tax under the Act, the credit of foreign tax shall be allowed against such tax in the same manner as is allowable against any tax payable under the normal provisions of the Act.
The CBDT has requested comments and suggestions on the draft rules by 2 May 2016 by way of an email or by post.
