Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Section 198 of the Act provides that all sums deducted (tax deducted), in accordance with the provisions of Chapter XVII-B shall, for the purpose of computing the income of an assessee, be deemed to be income received.

2. It was seen that some assessees are not including taxes withheld outside India for the purposes of calculating their total income which was leading to under reporting of total income as only their net income was being offered for taxation. However they were claiming credit for the taxes withheld abroad resulting in double deduction on account of income not being included in total income but credit for foreign taxes withheld was being taken.

3. In order to address this issue, it is proposed to amend section 198, to provide that all sums deducted in accordance with the provisions of Chapter XVII-B and income tax paid outside India by way of deduction, in respect of which an assessee is allowed a credit against the tax payable under the Act, are for the purpose of computing the income of the assessee, deemed to be income received.

4. The amendment will take effect from the 1st day of April, 2025.

[Clause 66]

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Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Inclusion of foreign tax withheld amounts as deemed income to align income computation with foreign tax credit claims. Proposed amendment deems amounts deducted under Chapter XVII-B and income tax paid outside India by way of deduction, where credit is allowed against tax payable under the Act, to be income received for computing an assessee's total income, preventing under reporting and double benefit from foreign tax credits.