An
individual, qualifying as ordinary tax resident in India under the Income-tax
Act, 1961 (the Act), is eligible to claim credit in India on taxes paid in
foreign country with respect to doubly taxed income. As per India-USA Double
Taxation Avoidance Agreement (India-US tax treaty), federal income taxes paid
are allowed as tax credits in India. In this regard, in an earlier ruling in
the case of Tata Sons Ltd, the Mumbai bench of Income Tax Appellate Tribunal
(the Tribunal) had held that credit of State taxes paid in USA shall also be
available in India.
The Ahmedabad bench of the Tribunal in a recent
ruling in the case of Dr. Rajiv Modi has reaffirmed that a taxpayer is entitled
to claim credit of State taxes paid in USA against Indian Income tax liability
under the provisions of the Act irrespective of the fact that the case
pertained to a country which had tax treaty with India
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