Chapter IX - Rebates and Reliefs
Section 159
Section 159: double taxation avoidance agreements
Section 159 is the provision most tax professionals still call "90/90A" - it lets the Central Government sign double taxation avoidance agreements (DTAAs) with other countries, and separately lets specified associations in India sign and have notified agreements with counterpart associations abroad. Either way, where a notified agreement applies, the assessee gets whichever treatment - the Act's or the agreement's - is more beneficial, subject to specific carve-outs.
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Need advice on Section 159?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The Central Government may enter into an agreement with the Government of— (a) any other country; or (b) any specified territory, for the purposes mentioned in sub-section (3), and may, by notification, make such provisions as necessary for implementing the agreement.
(2) Any specified association in India may enter into an agreement with any specified association in the specified territory for the purposes mentioned in sub-section (3) and the Central Government may, by notification, make such provisions as may be necessary for adopting and implementing such agreement.
(3) The agreement mentioned in sub-section (1) or (2) may be entered for— (a) the granting of relief in respect of— (i) income on which income-tax under this Act and income-tax in that country or specified territory, as the case may be have been paid; (ii) income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be, to promote mutual economic relations, trade and investment; or (b) the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in the said agreement for the indirect benefit to residents of any other country or territory); (c) exchange of information for–– (i) the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country or specified territory, as the case may be; or (ii) investigation of cases of such evasion or avoidance; or (d) recovery of income-tax under this Act and under the corresponding law in force in that country or specified territory, as the case may be.
(4) Where,–– (a) the Central Government has entered into an agreement with the Government of any country or specified territory, as the case may be, under sub-section (1); or (b) a specified association in India has entered into an agreement with a specified association of any specified territory under sub-section (2) and such agreement has been notified under that sub-section, for granting relief of tax, or avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.
(5) The charge of tax,–– (a) in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable; or (b) in respect of a company incorporated in the specified territory at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company or such company incorporated in the specified territory, as the case may be.
(6) Irrespective of anything contained in sub-section (4), the provisions of Chapter XI shall apply to the assessee, even if such provisions are not beneficial to him.
(7) Where, any–– (a) term used in an agreement entered into under sub-section (1) or (2), is defined under the said agreement, the said term shall have the same meaning as assigned to it in that agreement and where the term is not defined in that agreement, but defined in this Act, it shall have the same meaning as assigned to it in this Act and the explanation, if any, given to it by the Central Government; or (b) term is used but not defined in this Act or in the agreement referred to in sub-section (1) or (2), it shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the said agreement, have the same meaning as assigned to it in the notification issued by the Central Government in this behalf, and the meaning assigned to such term shall be deemed to have effect from the date on which that agreement came into force; or (c) term is used in any agreement entered into under sub-section (1) or (2), and not defined under the said agreement or this Act, or in any notification issued under clause (b), then, unless the context otherwise requires, it shall have the same meaning as assigned to it–– (i) in any Act of the Central Government related to taxes; and (ii) in any other case, in any other law of the Central Government, and shall be deemed to have effect from the date on which the said agreement came into force.
(8) An assessee, not being a resident, shall be entitled to claim any relief under an agreement mentioned in sub-section (1) or (2), only when–– (a) a certificate of his being a resident in any country or specified territory, is obtained by him from the Government of that country or Government of that specified territory, as the case may be; and (b) he provides such other documents and information, as may be prescribed.
(9) For the purposes of this section,–– (a) “specified associations” means any institution, association or body, whether incorporated or not–– (A) functioning under any law for the time being in force in India or the laws of the specified territory; and (B) which may be notified as such by the Central Government for the purposes of this section; (b) “specified territory” means any area outside India which may be notified as such by the Central Government.
Introduction
Section 159 empowers India to enter and implement tax agreements with foreign countries or specified territories for double-tax relief, avoidance, information exchange and related purposes. Claiming treaty relief requires the operative agreement, residence evidence and its conditions, not merely a cross-border payment.
Key takeaways
Treaty authority
The Central Government may make and notify agreements with foreign countries or specified territories for double-taxation relief, information exchange and tax recovery.
Treaty application
A taxpayer claiming treaty treatment must check the notified agreement and this section's eligibility requirements; the domestic Act and treaty may yield different treatment.
Two routes for an agreement
The Central Government may enter into an agreement with the Government of any other country or any specified territory for the purposes described below, and may notify provisions necessary to implement it.
Separately, any specified association in India may enter into an agreement with a specified association in a specified territory for the same purposes, and the Central Government may notify provisions to adopt and implement that agreement.
What the agreement can cover
An agreement under either route may be entered into for:
- Granting relief in respect of income on which tax has been paid both under this Act and under the corresponding law of the other country/territory, and relief in respect of income-tax chargeable under both, to promote mutual economic relations, trade and investment
- Avoidance of double taxation of income under this Act and the corresponding foreign law, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance - including treaty-shopping arrangements aimed at indirectly benefiting residents of a third country or territory
- Exchange of information for preventing evasion or avoidance of tax, or investigating such evasion or avoidance
- Recovery of income-tax under this Act and the corresponding foreign law
Which treatment applies - Act or agreement
Where a Central Government agreement or a notified specified-association agreement applies to an assessee, the provisions of this Act apply to that assessee only to the extent they are more beneficial than the agreement.
A higher rate of tax charged on a foreign company (compared to a domestic company), or on a company incorporated in the specified territory (compared to a domestic company), is not treated as a less favourable charge for this purpose.
Irrespective of the "more beneficial" rule above, the provisions of Chapter XI apply to the assessee even where they are not beneficial to the assessee.
How terms in the agreement are interpreted
A term defined in the agreement has the meaning given there. A term not defined in the agreement but defined in this Act has the meaning given in this Act (and any Central Government explanation of it). A term used but not defined in either the Act or the agreement takes the meaning assigned by Central Government notification, effective from the date the agreement came into force; failing that, the meaning under any Central Government tax law, or otherwise any other Central Government law.
Claiming relief as a non-resident
A non-resident assessee can claim relief under such an agreement only if they obtain a tax residency certificate from the Government of the relevant country or specified territory, and provide such other documents and information as may be prescribed.
Key definitions
| Term | Meaning |
|---|---|
| Specified association | Any institution, association or body, incorporated or not, functioning under Indian law or the laws of the specified territory, and notified as such by the Central Government for the purposes of this section |
| Specified territory | Any area outside India notified as such by the Central Government |
Step-by-step flow for applying Section 159
- 1
Is there an agreement under Section 159 that applies to the assessee?
Either a Central Government agreement with another country or specified territory, or a notified agreement between specified associations.
- No: Apply the Act; for doubly taxed foreign income consider Section 160.
- Yes: Go to the next step.
- 2
Is the assessee a non-resident claiming relief?
- Yes: Obtain a residence certificate from the Government of that country or territory and provide the prescribed documents and information.
- No: Go to the next step.
- 3
Interpret the agreement terms
Use the agreement's definition first; then this Act; then a Central Government notification; then other Central tax laws or other Central laws, as set out in Section 159(7).
- 4
Compare the Act and the agreement
The Act applies only to the extent it is more beneficial. A higher rate on a foreign company than on a domestic company is not a less favourable charge.
- 5
Apply Chapter XI regardless
Chapter XI applies even where it is not beneficial to the assessee.
Practical checklist
Do
- Identify the relevant notified agreement and its article for the income type and tax year.
- For a non-resident claim, obtain the residence certificate and prescribed supporting information.
Avoid
- Do not assume a treaty benefit applies without confirming tax residence and the agreement's eligibility conditions.
- Do not use an outdated article or notification after an amendment or protocol.
Illustrative example
Illustration: a non-resident claiming treaty relief
Hypothetical facts (illustration only, not a real taxpayer): A company resident in Country Y, with which India has a notified agreement, earns income from India. Assume the agreement provides a more favourable treatment for that income than the Act does. The company has a residence certificate from Country Y's Government.
Agreement applies
The company is covered by an agreement under Section 159(1).
Documentation
As a non-resident, it must hold the residence certificate and furnish the prescribed documents and information to claim relief.
More beneficial rule
Since the agreement is assumed more favourable, the Act applies only where it is more beneficial, so the agreement treatment is used.
Chapter XI
If Chapter XI provisions apply to the arrangement, they apply even though not beneficial to the company.
Outcome
- Treaty relief is available subject to the residence certificate and prescribed documents.
- The agreement's actual terms and rates must be read from the notified agreement; none are assumed here.
Glossary
- Tax treaty
- An agreement implemented under this section for relief or avoidance of double taxation and related cooperation.
- Residence certificate
- Government-issued proof of treaty residence required for a non-resident's relief claim.
Frequently asked questions
Is Section 159 the same as what people call "DTAA" or "90/90A"?
Yes - Section 159 is the Income-tax Act, 2025's provision for double taxation avoidance agreements between the Central Government and other countries/territories, and for adopted agreements between specified associations, corresponding to sections 90 and 90A of the Income-tax Act, 1961.
If a DTAA and the Income-tax Act, 2025 give different treatment, which applies?
The provisions of this Act apply only to the extent they are more beneficial to the assessee than the agreement - otherwise the agreement's treatment applies.
What must a non-resident do to claim treaty relief?
Obtain a certificate of tax residency from the government of the relevant country or specified territory, and furnish such other documents and information as prescribed.
Does the "more beneficial" rule override every part of the Act?
No - Chapter XI provisions apply to the assessee regardless of the agreement, even where they are not beneficial to the assessee.
Need help applying this provision to your situation?
Talk to our team about claiming DTAA reliefLast updated 10 October 2026