When Section 90 or Section 91 relief may apply to foreign income

Rohan: I just got a notice from the Income Tax Department about foreign income and I’m panicking – do I have to pay tax on that?

Veda: Don’t sweat it, Rohan. Let’s see if Section 90 or 91 can help you.

When Section 90 Relief Can Help

Rohan: What’s the difference between 90 and 91?

Veda: Section 90 lets you claim a credit for tax you already paid abroad, so you don’t pay twice. It applies when you’re a resident in India and the income is taxable in another country.

What is Section 90?

Think of it like a “tax swap” – you pay in the UK, India lets you offset that against your Indian bill.

When does Section 90 apply?

It covers salary, freelance fees, rental income, and interest from abroad, as long as you’re a tax resident here.

Key conditions for Section 90

You must be an Indian resident, the foreign tax must be paid, and the income must be taxable there. The credit can’t exceed the Indian tax on that income.

Rohan: So if I earned a salary in the UK, can I use Section 90?

Veda: Yes, if you’re a resident for tax purposes in India. The UK will deduct tax at source, and you can claim a credit here. The credit is limited to the Indian tax on that salary.

Example: UK salary

Say you earn £50,000, UK tax is £10,000. Indian tax on that amount might be ₹8 lakh. You can claim up to ₹8 lakh as a credit, reducing your Indian liability.

Rohan: What about dividends from a US company?

Veda: Dividends are also covered under Section 90. The US will withhold tax, and you can claim a credit in India for that amount, up to the Indian tax on the dividend.

Dividend example

If you get $2,000 dividends and the US withholds $400, Indian tax on that $2,000 might be ₹15,000. You can claim up to ₹15,000 as a credit.

Rohan: I have capital gains on a house in Dubai. Does Section 91 help?

Veda: Possibly. Section 91 applies when the gain is not taxable in India because the asset is located abroad and you’re not a resident for that income. You can get relief if the gain is taxed abroad.

When Section 91 applies

It’s used for capital gains on foreign assets, such as a Dubai property, where the gain is taxable only in the country of location. You can claim a credit for foreign tax paid, but only if the gain is included in your total income.

Rohan: I heard there’s a checklist. Can you give me one?

Veda: Sure, here’s a quick checklist to see if you qualify for any relief.

Checklist for Claiming Relief

Confirm your residential status for the Indian tax year.
Identify the foreign income and the tax paid there.
Check if the income falls under Section 90 (regular income) or Section 91 (capital gains, specific assets).
Calculate the credit limit – it cannot exceed the Indian tax on that income.
File the appropriate schedule (Schedule FA) with your return.
Keep documents like tax receipts, TDS certificates, and proof of residency.

When Section 91 Relief Can Help

Rohan: What about capital gains on a house I own in Dubai?

Veda: That may fall under Section 91 if the gain is not taxable in India because the property is located abroad and you are not a resident for that income. You can claim relief if the gain is taxable there.

When Section 91 applies

Rohan: Any other situations where Section 91 is useful?

Veda: Yes, for example, if you sell shares of a foreign company and the gain is taxed abroad but not in India, Section 91 can give you relief.

Key condition

The asset must be situated outside India and the gain must be taxable there; otherwise Indian tax applies directly.

Common Pitfalls

Many NRIs miss the mark because they treat foreign tax credit as a free pass. Here are the usual traps:

Assuming any foreign tax paid qualifies – you must link it to Indian taxable income.
Forgetting to include foreign income in your total taxable amount, which can lead to under‑reporting.
Missing the deadline to file Schedule FA – the due date is the same as your return.
Not keeping proper documentation; the taxman may ask for proof of foreign tax paid.
Assuming Section 91 works for all overseas assets – it only applies to capital gains on foreign property or shares.

FAQs

Can I claim relief if I am a non‑resident in India?

No. Section 90 and 91 relief is available only to Indian residents. If you are a non‑resident, foreign income is generally not taxed in India, except for income earned in India.

Do I need to file a separate return for foreign income?

No separate return is required, but you must report the foreign income in your main return and attach Schedule FA if you claim a credit.

What if the foreign tax rate is higher than the Indian rate?

You can claim a credit for the amount of tax actually paid, but the credit cannot exceed the Indian tax payable on that income. Any excess foreign tax is not refundable.

Disclaimer

This article is for educational purposes only and does not constitute tax or financial advice. Tax laws change; verify the latest rules on the Income Tax Department website https://www.incometax.gov.in/iec/foportal/. For personal advice, consult a qualified tax professional.