Double Taxation Relief for NRIs: Foreign Tax Credit Under Section 91

Most NRI tax planning around double taxation focuses on DTAA relief under Section 90, because most of the countries NRIs live in (UAE, US, UK, Singapore, Australia, Canada) have a treaty with India. But a meaningful number of NRIs and residents with foreign-sourced income earn it, or pay tax on it, in a jurisdiction India has no treaty with at all. Section 91 exists precisely for that gap, and it works differently enough from Section 90 that assuming the same process applies is a common, costly mistake.

What Section 91 Actually Does

Section 91 of the Income Tax Act provides unilateral relief from double taxation: relief India grants on its own, not because a treaty requires it, on income that has been taxed both in a foreign country and in India, where no DTAA exists between India and that country. It applies to residents and non-residents alike (including NRIs and those in RNOR status) with respect to income that is taxable in both jurisdictions.

The practical trigger is straightforward: an individual has income sourced in, or taxed by, a country India has no double taxation treaty with, and the same income is also taxable in India (either because the individual is a resident being taxed on global income, or because specific India-sourced income of an NRI happens to have also suffered tax abroad). Without Section 91, that income would be taxed twice in full, once by the foreign country and again by India, with no credit for either.

Section 90 vs Section 91: The Key Difference

The two sections are mutually exclusive in application: you use whichever one matches whether a treaty exists, not whichever gives a better result. If a DTAA is in force, Section 90 governs, even for income types the treaty happens to tax less favourably than Section 91's formula would.

How the Section 91 Credit Is Computed

The relief is calculated as a credit equal to the lower of the Indian tax rate or the foreign tax rate applicable to the doubly taxed income, applied against that income:

• If the foreign tax rate is lower than the Indian rate: the full foreign tax paid is creditable against the Indian tax liability on that income; the balance up to the Indian rate is still payable in India.
• If the foreign tax rate is higher than the Indian rate: the credit is capped at the Indian rate's worth of tax; the excess foreign tax above that is simply not recoverable as a credit and becomes a real, uncredited cost to the taxpayer.

This asymmetry is the single most important practical point about Section 91: unlike some countries' foreign tax credit systems that allow carry-forward of excess credit, Section 91 gives no such carry-forward. A taxpayer earning income from a high-tax, no-DTAA jurisdiction should factor this capped-credit exposure into planning before assuming the two tax bills will simply offset.

Who Actually Needs This

In practice, Section 91 comes up for NRIs and residents with income connections to countries that don't have a DTAA with India, or where the specific income type falls outside what an existing DTAA covers. It also matters for returning NRIs in RNOR status who still hold foreign income streams (a foreign pension, residual foreign employment income, or investment income) from a jurisdiction outside India's treaty network, and for residents with foreign consulting, rental, or investment income from such a country. It is worth checking treaty coverage before assuming Section 91 versus Section 90 applies; the two are not interchangeable and the wrong claim can be rejected outright on processing.

Claiming the Credit: Form 67

Both Section 90 and Section 91 relief are claimed through Form 67, filed electronically on the income tax portal, which must generally be filed on or before the due date of filing the return of income for the relevant assessment year to be valid (CBDT has, in specific circumstances, permitted later filing, but the safer practice is always to file on time rather than rely on a relaxation). For a Section 91 claim specifically, supporting documentation should establish:

• The nature and amount of the foreign income
• The foreign tax actually paid or deducted on that income, evidenced by a statement or certificate from the foreign tax authority, the foreign tax return, or an equivalent document such as a payslip/bank statement showing the deduction
• The Indian tax computation showing how that same income has also been included and taxed in the Indian return

No Tax Residency Certificate is needed for a Section 91 claim, since the relief does not depend on treaty residency tie-breaker rules; it is purely a statutory domestic provision. This is a genuine simplification compared to Section 90 relief, though it does not reduce the need for solid documentary evidence of the actual foreign tax paid, which assessing officers do scrutinise on review.

A Worked Illustration

Suppose an NRI has consulting income of ₹20 lakh sourced from a country with no DTAA with India, and that country has taxed it at an effective rate of 25% (₹5 lakh). The same income is includible in the NRI's Indian tax computation (to the extent it is taxable in India based on residential status and source rules), and works out to an effective Indian rate of 20% (₹4 lakh) on that income. Because the Indian rate (20%) is lower than the foreign rate (25%), the Section 91 credit is capped at ₹4 lakh, the Indian-rate equivalent; the additional ₹1 lakh paid abroad above the Indian rate is not creditable and is an absorbed cost. Had the rates been reversed, i.e. the Indian rate higher than the foreign rate, the full ₹5 lakh foreign tax would have been creditable, with the remaining Indian liability payable on top.