Countries with which no agreement exists
[Section-160 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 160(1) of Income Tax Act 2025
160(1) If any person who is resident in India in any tax year proves that, in respect of his income which accrued or arose during that tax year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 159 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income,––
- (a) at the Indian rate of tax or the rate of tax of the said country, whichever is the lower; or
- (b) at the Indian rate of tax, if both the rates are equal.
Section 160(2) of Income Tax Act 2025
160(2) If any non-resident person is assessed on his share in the income of a registered firm assessed as resident in India in any tax year and such share includes any income accruing or arising outside India during that tax year (and which is not deemed to accrue or arise in India) in a country with which there is no agreement under section 159 for the relief or avoidance of double taxation and he proves that he has paid income-tax by deduction or otherwise under the law in force in that country in respect of the income so included he shall be entitled to a deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income so included,––
- (a) at the Indian rate of tax or the rate of tax of the said country, whichever is the lower; or
- (b) at the Indian rate of tax, if both the rates are equal.
Section 160(3) of Income Tax Act 2025
160(3) In this section,—
- (a) “income-tax” in relation to any country includes any excess profits tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country;
- (b) “Indian income-tax” means income-tax charged as per this Act;
- (c) “Indian rate of tax” means the rate determined by dividing Indian income-tax after deduction of any relief due under the provisions of this Act but before deduction of any relief due under this section, by the total income; and
- (d) “rate of tax of the said country” means income-tax and super-tax actually paid in the said country as per the corresponding laws in force in the said country after deduction of all relief due, but before deduction of any relief due in the said country in respect of double taxation, divided by the whole amount of the income as assessed in the said country.
FAQs on Section 160 of Income Tax Act 2025
What is the purpose of Section 160 of the Income Tax Act, 2025?
It provides relief from double taxation to residents and certain non-residents who have paid tax in a foreign country that does not have a Double Taxation Avoidance Agreement (DTAA) with India under Section 159.
Who is eligible to claim relief under Section 160(1)?
A resident in India who has earned income outside India (which is not deemed to accrue or arise in India) and has paid income-tax in a country that has no agreement with India under Section 159.
What conditions must be fulfilled to claim deduction under Section 160(1)?
The person must prove that tax has been paid in the foreign country, and the income must have accrued or arisen outside India and must not be deemed to accrue or arise in India.
How is the deduction calculated under Section 160(1)?
The deduction is equal to the tax on such doubly taxed income at either the Indian rate of tax or the rate of tax of the foreign country, whichever is lower. If both rates are equal, the Indian rate applies.
Who is covered under Section 160(2)?
A non-resident person assessed on their share of income from a registered firm resident in India, where such share includes income accrued or arisen outside India in a country with no DTAA.
Is the deduction under Section 160(2) available on the entire share of firm’s income?
No, it is available only on that part of the share which includes income accrued or arisen outside India and which has been taxed in a foreign country with no agreement.
What is meant by “income-tax” in a foreign country under Section 160(3)(a)?
It includes income-tax as well as excess profits tax or business profits tax charged by the government or local authority of that country.
What is “Indian income-tax” as per Section 160(3)(b)?
It refers to the income-tax charged under the provisions of the Income Tax Act, 2025.
How is the “Indian rate of tax” determined?
It is calculated by dividing the Indian income-tax (after deducting any other relief under the Act, but before deduction under Section 160) by the total income.
How is the “rate of tax of the said country” computed?
It is calculated by dividing the total tax (including super-tax) actually paid in that country by the income assessed there, after deducting all reliefs except those related to double taxation.
Can a taxpayer claim both DTAA and Section 160 relief for the same income?
No, Section 160 applies only where there is no agreement under Section 159 (i.e., no DTAA). If a DTAA exists, relief must be claimed under the relevant agreement.
Is documentary proof required to claim relief under Section 160?
Yes, the taxpayer must prove that the foreign tax was actually paid.
Can relief be claimed under this section if the income is deemed to accrue or arise in India?
No, relief is only available for income that is not deemed to accrue or arise in India.
Is the relief under Section 160 automatic?
No, it must be claimed by the taxpayer by providing relevant evidence of foreign taxation.
Does Section 160 apply to both business and non-business income?
Yes, it applies to any foreign-sourced income as long as the conditions under the section are met.
Does this section provide credit or deduction for foreign tax?
It provides a deduction from Indian income-tax payable, not a direct credit against income.
What if the foreign rate of tax is higher than the Indian rate?
In such case, deduction is allowed only at the lower Indian rate of tax.
What if the foreign rate of tax is equal to the Indian rate?
Then, deduction is allowed at the Indian rate of tax.
Can Section 160 relief be claimed year after year?
Yes, as long as the conditions are fulfilled each year and the foreign income continues to be taxed in a country with no DTAA.
Does this section override any other relief provisions in the Act?
No, it is in addition to other provisions, but applies specifically when no DTAA exists.
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