Manual - Introduction - Income computation and disclosure standards (ICDS)

Where a non-resident claims the benefit of a double taxation avoidance agreement (DTAA), by virtue of section 90(2), the provisions of the DTAA would prevail over the provisions of the Income- tax Act, including section 145(2) and ICDS notified thereunder.

Therefore, ICDS applicable for computation of income of Non-residents in the following cases:

- there is no specific provision in the related DTAA or there is no conflict between the income computed as per ICDS and treatment of income as per DTAA

- The income which does not fall within the scope of related DTAA

Further, where the provisions of DTAA provides the rate of tax on specified income but does not specify the manner in which such income is to be computed, the provisions of ICDS would prevail for determination of income.

DTAA supremacy: ICDS governs income computation when the treaty is silent, non-conflicting, or specifies only tax rate. ICDS apply to non-residents claiming DTAA benefits only where the DTAA is silent, where there is no conflict between ICDS computation and treaty treatment, where the income falls outside the DTAA's scope, or where the DTAA fixes a tax rate but does not prescribe the method of computing the income, in which case ICDS governs computation.