It refers to the relief scheme which can be provided to the tax payer by home country irrespective of whether it has any agreement with other countries or has otherwise provided for any relief at all in respect of double taxation. The need for such relief may arise because every country cannot be in position to arrive at double taxation avoidance agreements.

In India, Section 91 of the Income Tax Act relates to unilateral relief. Under it, if any person/company who/which is resident in India in any previous year proves that, in respect of its income which accrued or arose during that previous year outside India, he has paid in any country with which there is no agreement (under section 90) for the relief or avoidance of double taxation, income tax, by deduction or otherwise, under the law in force in that country, it shall be entitled to the deduction from the Indian income tax payable by him of a sum calculated on such doubly taxed income at the average Indian rate of tax or the average rate of tax of the said country, whichever is lower,or at the Indian rate of tax if both the rates are equal.

In other words, unilateral relief will be available for the tax-payer, if the following conditions are satisfied:-

• The person or company (assessee) in question must have been resident in India in the previous year;



• Same income must have accrued or arisen to him outside India during the previous year and it should also be received outside India. Such income must not be deemed to accrue or arise in India;



• That income should be taxed both in India and in a foreign country and there should be no reciprocal arrangement for relief or avoidance from double taxation with the country where the income has accrued or arisen.



• In respect of that income, the person or company (assessee) must have paid by deduction or otherwise, tax under the law in force in the foreign country in question in which the income outside India has arisen.



• It is necessary that the foreign tax be levied in a country with which India has no agreement for relief against or avoidance of double taxation, but it is immaterial that tax paid in such a foreign country is in respect of income arising in another foreign country with which Indian has such an agreement.
  

The steps involved in calculating such relief under this section are:- (a) Calculate tax on total income (including foreign income) and claim relief applicable on it (b) Add surcharge and education cess after claiming rebate under the Section 88E (c) Compute average rate of tax by dividing the tax computed in previous step with the total income (d) Calculate average rate of tax of foreign country by dividing income-tax actually paid in the said country after deduction of all relief due (e) Claim the relief from the tax payable in India at the rate computed in previous two steps on the basis of whichever is less.

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