Foreign tax credit limits double taxation relief by capping credit to domestic tax attributable to foreign-source income.

The Convention allows a resident taxed in both Contracting States to claim a foreign tax credit limited to domestic tax attributable to the foreign-source income; companies must apply such credit first against income-tax and then surtax. Romanian amounts paid by State enterprises qualify as Romanian tax. Indian tax for credit purposes includes amounts forgone under incentive-based exemptions. When a Contracting State exempts income under the Convention, it may compute tax on the taxpayer's remaining income using the rate that would have applied had the exempt income not been exempted.

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