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Draft Rules for Foreign Tax Credit

01 April 2016

Milind Kothari, Managing Partner |

Growing cross border trade and advent of complex business models give rise to challenges of double taxation and double non-taxation. While the world, including India, is looking to clasp double non-taxation, it is important that clarity be brought in tax laws and interpretation of tax treaties to avoid double taxation of income. Foreign tax credit is an important measure to provide relief from double taxation. Most of the tax treaties provide that in case of doubly taxed income, the country of residence should allow credit for taxes paid in the country of source. However, such credit is subject to local tax laws of the country of residence.