Clear guidelines on foreign tax credit should be introduced – ICAI

Clause 207 relates to foreign tax credit allowable to an assessee, being a resident in India in any financial year on income which is taxed in India as well as outside India. The said clause further provides that where the assessee is required to pay Indian incometax in respect of an income which has been taxed in any specified territory or other country with which India has an agreement under clause 291, the foreign tax credit shall be allowed in accordance with the agreement entered into with such specified territory or country. Where there is no such agreement, the tax credit shall be determined at the Indian rate of tax or the rate of tax of the other country, whichever is lower. The credit, in either case shall not exceed the Indian income-tax payable in respect of income which is taxed outside India and the Indian income-tax payable on total income of the assessee. The existing foreign tax credit guidelines are not sufficient to deal with various foreign tax credit issues. Hence, detailed guidelines should be introduced to bring clarity. It is suggested that detailed & clear guidelines on foreign tax credit should be introduced