Corporate Tax Planning AY 2020-21 Sem V B.ComH

www.srcc.edu/e-resources Page 1 of 76 University of Delhi – B.Com.(H) Sem V Corporate Tax Planning By Dr. Naveen Mittal AY 2020-21 Session started from 10 August 2020 and Ended on 28 November 2020 COVID-19 Situation Lecture 3 Double Taxation Relief [AY 2020-21 (PY 2019-20)] 90(1), 90(2), 90A(1), 90A(2), Incidence of Tax [Sec. 5] Income is accrued outside India/ Received outside India: Rs. 7,00,000 ROR: Taxable RNoR: Depends whether it is from business/ profession and if the business/ profession is controlled (or set up) in India: Taxable; otherwise, exempt NR: Not Taxable Case of double taxation and why do we need double taxation relief? Example: Mr. X (ROR and age is 67 years) during the PY 2019-20 has a rental income from a house in Delhi Rs. 6,00,000 and Rs. 7,00,000 the income accrued in USA (and also received there). Suppose, the tax rate in India is 40% and in USA the tax rate is 60%. Solution: Income accrued as well as received outside India 7,00,000 USA [60%] 4,20,000 India [40%] 2,80,000 Total tax 7,00,000 Remaining income in your hand Nil That is why, we need double taxation relief. Double taxation relief can be given under section 90, 90A and 91. Section 90 and 90A are having theory applications and section 91 is having numerical applications as has been explained below – Section 91 Conditions: 1. Resident 2. Accrued as well as received outside India (income is not deemed to accrue in India under section 9) 3. Income is earned in the country with which no DTAA is signed 4. Tax has been paid in that country on such income. Relief under section 91(1) = Doubly taxed income* Lower of IRT/ FRT Example 1 (Section 91): Mr. X (ROR and age is 67 years) during the PY 2019-20 has a rental income from a house in Delhi Rs. 6,00,000 and Rs. 7,00,000 the income accrued in USA (and also received there). Tax paid in foreign country is Rs. 1,35,980. Compute the amount of tax payable by Mr. X for the AY 2020-21. Solution:

Corporate Tax Planning AY 2020-21 Sem V B.ComH

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