What is Section 90 of the Income Tax Act?

Here are some of the main key provisions of Section 90 of the Income Tax Act, given below: 

• Relief Under the DTAA: Through section 90 of the IT Act, you can get relief under the Double Taxation Avoidance Agreement. 
• Applicability: Section 90 applies to the different sources of income, which include Interests, dividends, salaries, profits, business, royalties, and capital gains. 
• Exemption Methods: Under the exemption method, if the income is taxed in a country, then it will be exempted in another country. This will help the individual to avoid paying taxes twice on the same income in a different country. 
• Credit Method: if the tax paid in one country is credited, then it will be against the other country's tax liability on the income. This results in a lower tax liability and allows the taxpayer to balance the foreign and domestic taxes. 
• Mutual Agreements Procedure: Section 90 of the IT Act allows MAP, which helps with dispute resolutions under the DTAA. If a taxpayer thinks that he has been taxed according to the DTAA and gets help with the MAP, which is a process between the authorities of two countries to talk to each other and solve the issue fairly. 

To compute the double taxation relief under section 90, you need to follow the given steps: 

• First, you need to calculate the total global income, which includes your foreign income and Indian income. 
• Compute the tax on the global income under the Income tax. 
• Compute the average tax by dividing the tax by global income. 
• Multiply the average rate of tax by foreign income. 
• Now, calculate the tax paid in a foreign country.