Section 160 Income Tax Act 2025: Can You Claim Foreign Tax Relief Without a DTAA?
Section 160 allows qualifying relief from Indian income-tax on income taxed in a foreign country with which India has no agreement for relief or avoidance of double taxation under Section 159. The relief generally uses the lower of the applicable Indian and foreign tax rates.
What is unilateral double taxation relief?
Double taxation may arise when the same foreign-source income is included in an Indian tax computation and is also taxed abroad. A double taxation avoidance agreement (DTAA) may address this situation where one exists. Section 160 provides statutory relief for specified circumstances when there is no agreement under Section 159 with the relevant country.
Relief is not an exemption of the foreign income. The qualifying foreign income remains subject to the applicable Indian tax rules, and a deduction is then allowed from the Indian income-tax payable, calculated at the lower prescribed rate on the doubly taxed income.
Section 160 explained: Subsection-by-subsection
Section 160(1): Resident persons receiving foreign income
A person resident in India in a tax year may qualify if income accrued or arose outside India in that year, was not deemed to accrue or arise in India, and foreign income-tax was actually paid under the law of a country with which India has no double-taxation relief or avoidance agreement under Section 159. The person must prove the relevant foreign tax payment.
The deduction from Indian income-tax payable is calculated on the doubly taxed income at the lower of the Indian rate of tax and the rate of tax of that foreign country. If both rates are equal, the Indian rate applies.
Section 160(2): Certain non-resident partners
Section 160(2) separately covers a non-resident assessed on a share of income of a registered firm assessed as resident in India. Where that share includes qualifying foreign income that has been taxed in a no-agreement country, the non-resident may claim the specified deduction on the included doubly taxed income, subject to proof and the other statutory conditions.
Section 160(3): Definitions and tax-rate calculations
Subsection (3) defines the taxes and effective rates used to calculate the relief. These definitions are essential: the relevant rates are calculated from tax and income figures rather than simply using headline slab or corporate tax rates.
Important statutory definitions under Section 160(3)
How is Section 160 relief calculated?
The general computation is: eligible doubly taxed income multiplied by the lower of the Indian rate and foreign-country rate. Rates must be computed using the statutory definitions and relevant figures.
Illustrative calculation
| Particulars | Illustrative amount |
|---|---|
| Total income in India | Rs. 12,00,000 |
| Eligible doubly taxed foreign income | Rs. 2,00,000 |
| Assumed Indian effective rate | 20% |
| Assumed foreign effective rate | 15% |
| Illustrative relief (Rs. 2,00,000 x 15%) | Rs. 30,000 |
These assumed figures demonstrate the lower-rate principle only. They are not statutory tax rates or a calculation for a particular tax year. Actual relief depends on the taxpayer's assessment, foreign tax proof and the prescribed rules.
What documents support a claim?
- Details showing the nature, amount and tax year of the foreign income.
- Foreign tax assessment, withholding certificate or payment receipt establishing tax actually paid.
- Records showing inclusion of the same qualifying income in the Indian tax computation.
- Working papers showing the Indian and foreign effective rates under Section 160(3).
- Applicable foreign tax credit disclosures, statements and prescribed forms under the Income-tax Rules, 2026, where required.
Check the applicable return instructions and foreign tax credit rules for the relevant tax year. Filing requirements and supporting evidence are distinct from the substantive entitlement created by Section 160.
Frequently asked questions
Can a resident individual claim relief if India has no DTAA with the foreign country?
Yes, provided the conditions in Section 160(1) are satisfied, including proof of qualifying foreign income-tax paid and double taxation of the relevant income.
Is relief equal to the entire foreign tax paid?
Not necessarily. The deduction is calculated on eligible doubly taxed income at the lower of the statutory Indian and foreign tax rates.
Does Section 160 apply to all non-residents?
No. Subsection (2) provides a specific rule for certain non-residents assessed on their share of income of a registered firm assessed as resident in India.
What is the corresponding provision in the 1961 Act?
Section 91 of the Income-tax Act, 1961 addressed unilateral relief where no agreement existed. For earlier tax years, the applicable law and transitional provisions must be considered.
Official statutory references
Updated: 10 November 2026. General statutory information; the application to particular facts depends on the relevant tax year, country and supporting documents.