Comparison of Section 160 of the Income Tax Bill 2025 with Section 91 of the Income Tax Act 1961

India’s tax laws offer relief to taxpayers who face double taxation in countries where India does not have a tax treaty. Under the Income Tax Act, 1961, this relief was provided under Section 91. In the Income Tax Bill, 2025, a similar provision exists under Section 160. While both sections serve the same purpose, there are a few differences in how they are structured and referenced.

1. Purpose and Scope

Section 91 of the Income Tax Act, 1961, and Section 160 of the Income Tax Bill, 2025, both aim to prevent double taxation for Indian residents earning income from countries that do not have a Double Taxation Avoidance Agreement (DTAA) with India.

Under the 1961 Act, Section 91 referred to Section 90 to define tax treaties. In the new 2025 Bill, Section 160 replaces Section 91, but now refers to Section 159 for agreements. This indicates a restructuring of how tax treaties and relief mechanisms are handled in the new bill.

Both sections apply to individuals who are Indian residents earning income from a foreign country that does not have a tax treaty with India. The law allows a deduction in India for foreign taxes paid, preventing the taxpayer from paying tax twice on the same income.

2. Relief and Deduction Mechanism

The method of relief remains unchanged in both sections. A taxpayer who has paid income tax in a foreign country where no treaty exists can claim a deduction from the Indian income tax payable. The deduction is calculated on the doubly taxed income using the lower of:

• The Indian tax rate, or
• The foreign tax rate of the country where the income was earned.

If the tax rate in both countries is equal, then the deduction is given at the Indian rate of tax.

Another aspect where both sections remain the same is for non-residents who are partners in an Indian firm. If their share of income from the firm includes income earned abroad (in a country with no tax agreement), they are also eligible for relief on the same basis.

3. Key Differences Between Section 91 and Section 160

While the core principle remains the same, there are some differences in wording, structure, and references between the two sections.

1. Change in Reference Section for DTAA Under the 1961 Act, Section 91 referred to Section 90 for defining tax treaties. In the 2025 Bill, Section 160 now refers to Section 159 instead of Section 90. This suggests that the framework governing tax treaties has been revised in the new law.
2. Special Provision for Agricultural Income in Pakistan Removed Section 91 provided a special tax relief for Indian residents who earned agricultural income in Pakistan and had to pay agricultural tax in Pakistan. This provision is absent in the new Section 160 of the Income Tax Bill, 2025. The removal of this provision may affect Indian taxpayers with agricultural interests in Pakistan.
3. Updated Legislative Structure and Definitions The wording and structure of Section 160 are more modern compared to Section 91, aligning with the simplified framework of the new Income Tax Bill, 2025. Key definitions such as:

4. Implications for Taxpayers

For most taxpayers, there is no major change in how relief from double taxation is granted. The tax credit calculation remains the same, ensuring that individuals and businesses do not suffer from double taxation in countries without a treaty.

However, two areas require attention:

1. Those with agricultural income in Pakistan may need further clarification on whether any alternative relief exists.
2. Taxpayers dealing with international transactions should check how Section 159 defines tax treaties, as this replaces Section 90 from the old law.

5. Final Thoughts

The transition from Section 91 in the 1961 Act to Section 160 in the 2025 Bill is largely about restructuring rather than changing the tax relief itself. The key takeaway is that relief for double taxation continues in cases where no treaty exists. The modernized structure makes the law easier to understand and navigate, though some taxpayers—especially those with agricultural income in Pakistan—should seek further clarification.