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How is the dividend from a regulated investment company in the US taxed under DTAA (Double Tax Avoidance Agreement) between the US and India for a resident of India?


For a person who is a resident in India, income earned from anywhere in the world shall be taxable in India. Considering you are a tax resident of India as per the Income-tax Act, this dividend income shall be taxable for you in India.

To check for benefits available under DTAA between the US and India, you must satisfy the eligibility criteria listed therein. As per the specified DTAA, dividend income earned shall be taxed at a rate of 25%. This tax shall be withheld before dividend is paid to you. In India, dividend income has now become taxable in the hands of investors and is added to their total income and taxed as per slab rates. If you satisfy the conditions mentioned in DTAA, you can claim a relief of tax already paid in the US against the tax liability in India.

I was on Ecuador payroll from January 2019 till 28 January 2020. I travelled to the country in December 2018 on a work permit and came back to India in January 2020. Once I returned to India, the company put me on Indian payroll but cut tax deducted at source (TDS) on an equivalent Indian salary (assuming that I paid the tax in India) for full FY20 (from April 2019 to March 2020). But I paid tax from April 2019 to January 2020 in Ecuador. How do I get a refund? How do I disclose my refund requirement in the income tax return form? Which form will I need to fill?

—Renu Kedia

Firstly, you should find out your residential status for FY20 in India as per the Indian Income-tax Act. In case you are a resident in India, you will have to report your income earned from employment in Ecuador in your Indian tax return. Even though a tax treaty does not exist between India and Ecuador, you may still be able to claim some relief on the tax paid in case such income is doubly taxed in the two countries. If you are a resident outside India, you are not required to report such income in the income tax return filed in India. Credit of foreign taxes is to be allowed in the year in which the income corresponding to such tax has been offered or assessed to tax in India. Certain forms are required to be submitted to the tax department online for claiming such tax credit. It is suggested that you seek help from an expert.

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at

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