Tax board to outline rules for foreign pre-paid taxes

NEW DELHI: Indian Central Board of Direct Taxes (CBDT) will outline rules to give relief on foreign pre-paid taxes.

Currently, the income tax law does not provide the manner for granting credit of taxes paid in any country outside.

Now, this situation is sought to be addressed with the latest budget providing that CBDT will frame rules for providing foreign tax credit.

Aseem Chawla, Partner, MPC Legal, a law firm, said the formalisation of the foreign tax credit rules will pave the way for last mile availability of credit of foreign taxes paid under tax laws of other countries.

“Absence of such regulations hindered the claim of such pre-paid taxes. This measure was long overdue”, Chawla told Business Line.

Amit Maheshwari, Partner, Ashok Maheshwary & Co, a firm of chartered accountants, said this was important as in a lot of cases the officers were disallowing foreign tax credits on “frivolous grounds” which were not in the spirit of double taxation avoidance pacts.