Sections 90 and 90A vs Section 159: Anti-Treaty-Shopping

Why Double Taxation Calls for Sections 90, 90A and 159

Cross-border trade has grown fast. That brings one problem: double taxation. The same income is taxed twice. It is taxed where it is earned, and again where the taxpayer lives.

To fix this, India signs tax treaties with other countries. These are Double Taxation Avoidance Agreements (DTAAs). Two sections of the Income Tax Act, 1961, govern this:

• Section 90: Covers tax treaties between India and foreign governments.

• Section 90A: Covers tax treaties between Indian and foreign specified associations.

The Income Tax Bill, 2025, proposes Section 159 instead. It merges and sharpens these rules. This article compares the three sections and explains what changes for taxpayers.

Understanding Section 90 (Income Tax Act, 1961)

What is Section 90?

Section 90 of the Act lets the Central Government sign tax treaties with foreign countries or specified territories to:

1. Give relief from double taxation, so income is not taxed twice.

2. Stop tax evasion and avoidance, so tax is fair.

3. Exchange tax data to curb black money and tax evasion.

4. Help recover tax, so dues are paid across borders.

Key Provisions of Section 90

• The Central Government signs tax treaties, so companies and people do not pay tax twice.

• A tax treaty beats domestic law where it applies. Relief applies if the treaty is more favourable.

• Rules against treaty shopping block abuse. They target shell companies and artificial deals.

• Tax data sharing helps authorities track cross-border deals.

Who Benefits from Section 90?

• Indian residents with foreign income (salary, dividends, interest, royalties).

• Foreign residents with Indian income (business income, capital gains).

• Companies working in many countries that want to avoid double taxation.

Understanding Section 90A (Income Tax Act, 1961)

What is Section 90A?

Section 90 covers deals between governments. Section 90A covers deals between Indian and foreign "specified associations", such as trade bodies. The Central Government must approve. The deal then gives relief from double taxation.

Key Provisions of Section 90A

• Any specified association in India can sign a deal with a foreign one.

• The deal needs a Central Government notification to take effect.

• Its aim matches Section 90: relief from double taxation, tax data exchange and tax recovery.

• Taxpayers it covers can pick the more helpful option, the deal or the Act.

Who Benefits from Section 90A?

• Trade and industry associations that handle cross-border trade.

• Professional bodies and trade groups that need tax clarity with foreign peers.

Introduction of Section 159 (Income Tax Bill, 2025)

Why Section 159?

The Income Tax Bill, 2025, aims to make tax law simpler. It merges Section 90 and Section 90A into one rule: Section 159.

Key Changes in Section 159

1. Merged rules: Sections 90 and 90A become one rule. It covers deals between governments and between associations.

2. Stronger rules against treaty shopping: Section 159 blocks artificial claims for treaty relief.

3. Better tax recovery: it is easier to collect tax from foreign entities.

4. More open data exchange: it helps tax authorities in different countries share data.

5. Global alignment: Section 159 lines India’s tax rules up with the OECD’s BEPS (Base Erosion and Profit Shifting) framework. That closes avoidance gaps.

Detailed Comparison of Sections 90, 90A, and 159

The table below compares the three sections:

Comparison Table

Final Thoughts & Key Takeaways

1. Section 159 simplifies tax law: by merging Sections 90 and 90A it gives one route to double taxation relief.

2. Stronger anti-abuse steps: taxpayers still get DTAA relief, but the rules block treaty shopping.

3. Global alignment: the new rules follow OECD guidelines more closely. India’s tax system gets more robust and open.

4. Choice for taxpayers: they can still pick the more helpful of the Act and the DTAA.

Conclusion

Section 159 of the Income Tax Bill, 2025, simplifies tax. It blocks abuse and brings countries closer on tax. For companies and people in cross-border deals, it brings more clarity and fairer tax.