Section 160 is the substantive equivalent of 1961 s. 91 -- the UNILATERAL foreign tax credit provision for income earned in countries WITHOUT DTAA with India. The provision recognises that even absent a treaty, double-taxation relief…
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ITA 2025 · Section 160
Section 160 — - COUNTRIES WITH WHICH NO AGREEMENT EXISTS (UNILATERAL FTC)
Section 160 is the substantive equivalent of 1961 s. 91 -- the UNILATERAL foreign tax credit provision for income earned in countries WITHOUT DTAA with India. The provision recognises that even absent a treaty, double-taxation relief should be available to Indian residents on a domestic-law basis. The mechanism: deduct from Indian tax on the doubly-taxed income an amount equal to the LOWER of (a) Indian tax rate × doubly-taxed income, or (b) Foreign tax rate × doubly-taxed income. Effectively a credit limited to the lower of two countries' rates. Rule 128 (1962) prescribes the FTC computation methodology. With 90+ DTAAs operational, s. 160 application is narrow -- typically for income from non-DTAA countries (some Caribbean / African / smaller jurisdictions).
STATUTORY ARCHITECTURE
FACT-PATTERN: Indian resident earns foreign-source income (e.g., royalty from non-DTAA country, business profit from non-DTAA country PE) -- that country taxes the income; India also taxes (s. 5(1) world-wide income basis). Without relief, full double-tax. Section 160 RELIEF METHODOLOGY: (i) DOUBLY-TAXED INCOME -- income taxed in BOTH foreign country and India. (ii) INDIAN TAX RATE -- Indian-tax-on-doubly-taxed-income / total-Indian-income (effective average rate). (iii) FOREIGN TAX RATE -- foreign-country tax-on-same-income / same-income amount. (iv) RELIEF = doubly-taxed income × LOWER OF [Indian rate, Foreign rate]. EFFECT: foreign tax is creditable up to limit of Indian tax on same income. If foreign rate < Indian rate -- full foreign tax credited; if foreign rate > Indian rate -- only Indian-rate-portion credited (residual foreign tax NOT refunded by India).
FORM 67 PROCEDURAL REQUIREMENT
FA 2015 / Rule 128 (effective FY 2016-17) made Form 67 mandatory for FTC claim. Form 67 includes: (a) Country-wise foreign income; (b) Foreign tax paid; (c) Tax certificate from foreign tax authority OR self-declaration with documentary evidence; (d) ITR sequencing -- Form 67 must be filed BEFORE return-filing under s. 263(1). FA 2022 amendment: Form 67 can be filed by the LATER OF the original return-filing date and end of relevant tax year (e.g., FY 2024-25 Form 67 by 31-Mar-2026). Pre-FA 2022 strict pre-filing rule was harsh -- many genuine FTC claims lost. Post FA 2022 more lenient.
CASE LAW / DEPARTMENTAL
(i) Tata Communications Ltd v. CIT (Bom HC) -- s. 91 vs s. 90 interaction; non-DTAA fallback. (ii) Pre-Rule 128 era: ad-hoc FTC computation via direct s. 91 formula; FA 2015 Rule 128 standardisation. (iii) Wipro Ltd v. ACIT (Kar HC, 2017) -- FTC under s. 91 vs DTAA-based-credit; methodology distinction. (iv) Bank of Baroda v. ACIT (ITAT Ahmedabad) -- foreign-PE-profit FTC computation; rate-vs-amount considerations.
PLANNING NOTES
(i) DTAA vs s. 160 -- DTAA typically more favourable; s. 160 only for non-DTAA countries; verify counterparty country DTAA status. (ii) FORM 67 -- file BEFORE return; post-FA 2022 deadline = end of tax year for Form 67; document foreign tax certificate / payment evidence. (iii) RATE CALCULATION -- compute both Indian (effective avg rate including surcharge / cess) and foreign rate carefully; lower applies. (iv) DOUBLY-TAXED INCOME ISOLATION -- maintain working-paper segregating foreign-source income from total income; allocate Chapter VIII deductions proportionally if needed. (v) MULTI-COUNTRY -- separate Form 67 entries per country; track each foreign-tax-payment separately.
CROSS-REFERENCES