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TMI BlogFuture of Unilateral Agreement relief in India : Clause 160 of the Income Tax Bill, 2025 Vs. Section 91 of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Bill, 2025 and Section 91 of the Income-tax Act, 1961 serve this very purpose, offering unilateral relief from double taxation in the absence of a DTAA. This commentary provides a detailed analysis of Clause 160 of the Income Tax Bill, 2025, examining its objectives, structure, and implications. It then undertakes a comprehensive comparative analysis with Section 91 of the Income-tax Act, 1961, highlighting similarities, differences, and the evolution of India's approach to unilateral double taxation relief. Objective and Purpose The legislative intent behind both Clause 160 and Section 91 is to mitigate the adverse effects of double taxation for Indian residents and certain non-residents in situations where no bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction from Indian income-tax is calculated on the doubly taxed income as follows: * At the Indian rate of tax or the rate of tax of the foreign country, whichever is lower; or * At the Indian rate of tax if both rates are equal. This ensures that the taxpayer does not receive relief exceeding the lower of the two applicable rates, which is consistent with the principle of preventing double, but not less-than-single, taxation. 3. Relief for Non-Residents in Registered Firms Clause 160(2) extends the relief to non-residents who are assessed on their share in the income of a registered firm resident in India, provided the share includes income taxed abroad. The calculation of relief mirrors that for residents, ensuring parity of treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , businesspersons, and investors with global operations, as well as for multinational enterprises with Indian headquarters. The requirement to choose the lower of the two rates ensures that taxpayers are not incentivized to shift income to low-tax jurisdictions solely for relief purposes, thus protecting the Indian tax base. 2. For Non-Resident Partners in Indian Firms Non-residents assessed on their share of income from Indian registered firms, which includes foreign income taxed abroad, are also protected from double taxation. This provision supports cross-border partnerships and joint ventures, enhancing India's attractiveness as a business hub. 3. Compliance and Documentation Claiming relief under Clause 160 will require robust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Clause 160 refers to section 159 of the 2025 Bill (the corresponding DTAA provision). This is a structural update reflecting the new legislation but not a substantive change. * Special Provision for Income from Pakistan: * Section 91(2) contains a specific provision for relief in respect of tax paid in Pakistan on agricultural income, allowing deduction of the amount of tax paid or a sum calculated at the Indian rate, whichever is less. This reflects historical and geopolitical considerations unique to India's relationship with Pakistan. Notably, Clause 160 omits this special provision, suggesting a move towards uniform treatment of all countries without DTAAs and a possible shift in policy focus. * Order and Wording of Subsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iformity. The overall structure of Clause 160 suggests a focus on clarity, consolidation, and modernization, while preserving the core relief mechanism established in Section 91. 4. Ambiguities and Potential Issues * Proof of Tax Payment: Both provisions require the taxpayer to prove foreign tax payment. However, neither specifies the exact nature of evidence required, leaving room for administrative discretion and potential disputes. * Calculation Complexities: The computation of "rate of tax of the said country" can be complex, especially where foreign tax systems differ significantly from India's. Issues may arise in allocating relief where foreign taxes are imposed on a consolidated basis or where foreign tax years do not alig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The principal changes are structural and terminological, aimed at greater clarity and alignment with the new legislative framework. The omission of the Pakistan-specific provision and the uniform treatment of all non-treaty countries reflect a shift towards greater neutrality and simplification. While the core relief mechanism remains robust, practical challenges in documentation, computation, and administration persist, and may warrant further guidance or regulatory clarification. As India continues to deepen its integration with the global economy, the relevance of such unilateral relief provisions may diminish with the expansion of the DTAA network. Nonetheless, their continued presence in domestic law is essential for protecting tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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