Chapter IX - Rebates and Reliefs
Section 160
Section 160: relief where no double taxation agreement exists
Section 160 is the backstop to Section 159. Where India has no double taxation agreement with a particular country under Section 159, a resident who has actually paid tax on foreign-sourced income in that country can still claim unilateral relief in India - a deduction from Indian tax calculated at whichever is lower, the Indian rate of tax or the foreign country's rate.
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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) If any person who is resident in India in any tax year proves that, in respect of his income which accrued or arose during that tax year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 159 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income,–– (a) at the Indian rate of tax or the rate of tax of the said country, whichever is the lower; or (b) at the Indian rate of tax if both the rates are equal.
(2) If any non-resident person is assessed on his share in the income of a registered firm assessed as resident in India in any tax year and such share includes any income accruing or arising outside India during that tax year (and which is not deemed to accrue or arise in India) in a country with which there is no agreement under section 159 for the relief or avoidance of double taxation and he proves that he has paid income-tax by deduction or otherwise under the law in force in that country in respect of the income so included he shall be entitled to a deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income so included,–– (a) at the Indian rate of tax or the rate of tax of the said country, whichever is the lower; or (b) at the Indian rate of tax if both the rates are equal.
(3) For the purposes of this section,— (a) “income-tax” in relation to any country includes any excess profits tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country; (b) “Indian income-tax” means income-tax charged as per this Act; (c) “Indian rate of tax” means the rate determined by dividing Indian income-tax after deduction of any relief due under the provisions of this Act but before deduction of any relief due under this Part, by the total income; and (d) “rate of tax of the said country” means income-tax and super-tax actually paid in the said country as per the corresponding laws in force in the said country after deduction of all relief due, but before deduction of any relief due in the said country in respect of double taxation, divided by the whole amount of the income as assessed in the said country.
Introduction
A resident who pays foreign income tax on foreign-source income in a country without a Section 159 tax-relief agreement may obtain unilateral Indian relief. Section 160 generally computes the deduction on doubly taxed income at the lower Indian or foreign rate.
Key takeaways
Relief without a tax treaty
A qualifying resident can claim relief for foreign income taxed in a country with which India has no Section 159 agreement, after proving the foreign tax was paid.
Lower-rate calculation
The relief is a deduction from Indian income-tax on the doubly taxed income at the lower of the Indian and foreign tax rates, or at the Indian rate if the rates are equal.
Special firm-share case
The section also covers a non-resident assessed on a share of a resident registered firm's qualifying foreign income, subject to the stated conditions and proof of foreign tax.
Relief for a resident's own foreign income
If a person resident in India in any tax year proves that, on income which accrued or arose during that year outside India (and which is not deemed to accrue or arise in India), they have paid income-tax - by deduction or otherwise - under the law of a country with which there is no Section 159 agreement for relief or avoidance of double taxation, they are entitled to a deduction from the Indian income-tax payable, calculated on the doubly taxed income at:
- The Indian rate of tax or the rate of tax of that country, whichever is lower; or
- The Indian rate of tax, if both rates are equal.
Relief for a non-resident's share in a resident firm's foreign income
The same relief is available to a non-resident who is assessed on their share of the income of a registered firm assessed as a resident in India, where that share includes income accruing or arising outside India (and not deemed to accrue or arise in India) in a country with no Section 159 agreement, and the non-resident proves that income-tax has been paid on it by deduction or otherwise under that country's law.
Key definitions
| Term | Meaning |
|---|---|
| Income-tax (in relation to any country) | Includes any excess profits tax or business profits tax charged on the profits by the Government of any part of that country, or a local authority in that country |
| Indian income-tax | Income-tax charged as per this Act |
| Indian rate of tax | The rate found by dividing Indian income-tax (after deducting any relief due under this Act but before deducting any relief due under this Part) by the total income |
| Rate of tax of the said country | Income-tax and super-tax actually paid in that country under its laws (after deducting all relief due there, but before deducting any double-taxation relief), divided by the whole amount of income as assessed in that country |
Step-by-step flow for applying Section 160
- 1
Is the assessee resident in India (or a non-resident assessed on a share of a resident registered firm's income)?
- No: Section 160 does not apply.
- Yes: Go to the next step.
- 2
Did the income accrue or arise outside India in the tax year, and is it not deemed to accrue or arise in India?
- No: No relief under Section 160.
- Yes: Go to the next step.
- 3
Is there an agreement under Section 159 with that country?
- Yes: Look to the agreement under Section 159, not Section 160.
- No: Go to the next step.
- 4
Can the assessee prove the foreign income-tax was paid?
- No: No relief.
- Yes: Go to the next step.
- 5
Compute the two rates and the relief
Indian rate = Indian income-tax (after reliefs under the Act but before this Part) / total income. Foreign rate = tax actually paid there (after reliefs, before double-taxation relief) / income assessed there. Relief = doubly taxed income x lower rate (Indian rate if equal).
Practical checklist
Do
- Confirm there is no applicable Section 159 agreement and that the income arose outside India and was taxed there.
- Retain foreign tax payment evidence and calculate the Indian and foreign rates using subsection (3)'s definitions.
Avoid
- Do not claim unilateral relief for income deemed to accrue or arise in India under this provision.
- Do not use a headline foreign statutory rate instead of tax actually paid after relevant relief.
Illustrative example
Worked example: relief at the lower rate
Hypothetical facts (illustration only, not a real taxpayer): Mr. Das, resident in India, earns ₹10,00,000 in a country with which India has no Section 159 agreement. That country assesses the ₹10,00,000 and he pays ₹1,50,000 tax there (after all reliefs there). His Indian total income, including that ₹10,00,000, is ₹50,00,000, and his Indian income-tax before relief under this Part is assumed to be ₹10,00,000 for illustration.
Rate of tax of the said country
₹1,50,000 / ₹10,00,000 = 15%.
Indian rate of tax
₹10,00,000 / ₹50,00,000 = 20%.
Lower rate
15% is lower than 20%.
Relief
15% x ₹10,00,000 = ₹1,50,000 deducted from Indian income-tax.
Outcome
- Indian income-tax after relief = ₹10,00,000 - ₹1,50,000 = ₹8,50,000.
- If the foreign rate had been higher than 20%, relief would be limited to 20% x ₹10,00,000 = ₹2,00,000.
Glossary
- Unilateral relief
- Indian deduction for double taxation where no applicable treaty-relief agreement exists.
- Doubly taxed income
- The same qualifying foreign-source income on which both foreign and Indian tax arise.
Frequently asked questions
When does Section 160 apply instead of Section 159?
Section 160 applies where India has no double taxation avoidance agreement under Section 159 with the country where the foreign income was taxed.
How is the relief amount worked out?
As a deduction from Indian income-tax payable, calculated on the doubly taxed income at the lower of the Indian rate of tax or the foreign country's rate of tax (or at the Indian rate if both are equal).
Does the relief require the tax to have actually been paid abroad?
Yes - the assessee must prove that income-tax was paid, by deduction or otherwise, under the law in force in that foreign country.
How is the "Indian rate of tax" worked out?
Section 160(3)(c) defines it as Indian income-tax, after any relief due under the Act but before relief under this Part, divided by total income.
Need help applying this provision to your situation?
Talk to our team about unilateral double taxation reliefLast updated 10 October 2026