Section 160 — Countries with which no agreement exists. Successor to s.91 of the 1961 Act.
Section 160 is in Chapter IX — Rebates and Reliefs, which runs from section 155 to section 160.
Sub-section (1) gives unilateral double taxation relief to a person resident in India. If he proves that on income which accrued or arose outside India during the tax year, and which is not deemed to accrue or arise in India, he has paid income-tax by deduction or otherwise under the law of a country with which there is no agreement under section 159, he is entitled to a deduction from the Indian income-tax payable of a sum calculated on that doubly taxed income — at the Indian rate of tax or the rate of tax of that country, whichever is lower, or at the Indian rate where both are equal.
Sub-section (2) extends the same relief to a non-resident assessed on his share in the income of a registered firm assessed as resident in India, where that share includes such foreign income and he proves the foreign tax paid.
Sub-section (3) defines four terms. "Income-tax" in relation to a country includes excess profits tax or business profits tax charged by the Government of any part of that country or a local authority there. "Indian income-tax" is income-tax charged as per this Act. The "Indian rate of tax" is Indian income-tax, after any relief due under the Act but before any relief due under this Part, divided by the total income. The "rate of tax of the said country" is income-tax and super-tax actually paid there, after all relief due there but before any relief there for double taxation, divided by the whole amount of the income as assessed there.
Where a treaty exists relief flows from the treaty; where none does, foreign income of a resident would bear tax twice with nothing to correct it. The section supplies relief unilaterally but measures it by the lower of two effective rates rather than by the foreign tax bill, so India does not fund a foreign country's higher rate. The definitions matter as much as the operative rule, because both rates are effective rates worked out by division, not headline rates.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Rate at which relief is computed | The lower of the Indian rate of tax and the rate of tax of the said country | Applied to the doubly taxed income; where both rates are equal, the Indian rate applies | Sub-section (1)(a) and (b); the same in sub-section (2)(a) and (b) |
| "Indian rate of tax" | Indian income-tax, after deduction of any relief due under this Act but before deduction of any relief due under this Part, divided by the total income | An effective rate, not the slab or headline rate | Sub-section (3)(c) |
| "Rate of tax of the said country" | Income-tax and super-tax actually paid there after all relief due there but before any relief for double taxation, divided by the whole income as assessed there | Measured on tax actually paid, not on the country's statutory rate | Sub-section (3)(d) |
Relief is a rate exercise, not a reimbursement: the sum is calculated on the doubly taxed income at the lower of two effective rates, so foreign tax above the Indian rate is a real cost that is never recovered. Both rates are effective rates arrived at by division under sub-section (3)(c) and (d), which is why the answer often differs from a comparison of headline rates. The section is available only where the country has no section 159 agreement with India, and only on proof — the person must prove both the foreign accrual and the tax paid — and income deemed to accrue or arise in India stays outside it whatever a foreign country charged.
An individual resident in India earns Rs 20 lakh in a country with which India has no section 159 agreement and pays tax there amounting, on the sub-section (3)(d) computation, to an effective 12%. If his Indian rate of tax under sub-section (3)(c) is 18%, relief is given at the lower rate — 12% of the Rs 20 lakh, Rs 2.4 lakh — deducted from the Indian income-tax payable. If his Indian rate were 9%, relief would be Rs 1.8 lakh and the excess foreign tax would simply not be recovered.
In the foreign tax relief claim made in a resident's return, backed by proof of the foreign income and the foreign tax paid, and in the assessment where that proof is tested. It also surfaces in the assessment of a non-resident partner taxed on a share in a registered firm assessed as resident in India.
at the Indian rate of tax or the rate of tax of the said country, whichever is the lower
"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 Part, by the total income
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See the circulars index.
