S.O.2213(E).- In exercise of the powers conferred by clause(ha) of sub-section (2) of section
295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby
makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (18th Amendment) Rules, 2016.
(2) They shall come into force on the 1st day of April, 2017.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), after rule 127,
following rule shall be inserted, namely:-
“128. Foreign Tax Credit.- (1) An assessee, being a resident shall be allowed a credit for the
amount of any foreign tax paid by him in a country or specified territory outside India, by
way of deduction or otherwise, in the year in which the income corresponding to such tax
has been offered to tax or assessed to tax in India, in the manner and to the extent as specified
in this rule:
Provided that in a case where income on which foreign tax has been paid or deducted, is
offered to tax in more than one year, credit of foreign tax shall be allowed across those years
in the same proportion in which the income is offered to tax or assessed to tax in India.
(2) The foreign tax referred to in sub-rule (1) shall mean,-
(a) in respect of a country or specified territory outside India with which India has
entered into an agreement for the relief or avoidance of double taxation of income in
terms of section 90 or section 90A, the tax covered under the said agreement;
(b) in respect of any other country or specified territory outside India, the tax payable
under the law in force in that country or specified territory in the nature of income-tax
referred to in clause (iv) of the Explanation to section 91.
