Danish credit for Indian tax you only paid years later

Two rules together create the whole problem.

Ligningsloven 33 stk. 1 gives credit for tax paid to a foreign state on income from sources there, and caps it at the share of your total Danish tax that falls proportionately on that income. Stk. 2 caps it again where a treaty applies: no credit for more than India has an unconditional right to charge under the treaty. So Indian tax withheld above the treaty rate is not a Danish credit at all, in any year.

And the credit is only for tax actually paid. Skatteradet put it plainly in SKM2021.649.SR: relief was available only for the tax actually borne in India. Den juridiske vejledning adds the evidential half, that you have to document how much foreign tax was paid. There is no provisional or estimated credit to fall back on while you wait for the Indian return to be processed.

The timing rule is the one nobody expects, and it is in your favour. Den juridiske vejledning C.F.4.1 says the tax does not have to have been paid in the year it relates to, and that a later assessment and payment abroad entitles you to relief in the income year the income was earned. So the credit does not attach to the year the money left your Indian account. It attaches to the Danish year that taxed the income.

Which means the correction is not a line on this year's return. It is a reopening of a year that has already been assessed.

Denmark gives you an ordinary route with a hard date, and an extraordinary route with conditions.

The ordinary deadline is a receipt deadline, not a posting one, so income year 2022 has to be asked for by 1 May 2026 and being in the post on the day is not enough. Inside it you have a right to reopening if the information you produce makes the assessment look wrong.

Outside it, 27 stk. 1 nr. 4 exists precisely for double taxation, so a taxpayer can fix the year without running a full mutual agreement procedure. Two things about it are routinely misquoted. It has a second sentence making Danish recognition of the foreign decision a statutory condition. And what counts as a foreign authority's decision is not defined anywhere in the guidance, so whether an ordinary Indian processing intimation qualifies is genuinely open, not settled.

The six-month clock in 27 stk. 2 runs from your own knowledge of the fact, which is a concrete assessment rather than a fixed trigger date. Skattestyrelsen can accept a late request where special circumstances justify it, and published cases show that being busy, or finding documents hard to obtain, is not one. Behind all of it sits a ten-year wall in 34 a stk. 4.

Everything Denmark needs comes out of one Indian act, so the order matters more than the effort.

1. File the Indian return early, not at the deadline. Nothing on the Danish side can move until the Indian tax is settled and paid. 2. Keep the intimation issued when the return is processed under Section 143(1). That is the document evidencing your final Indian tax. It is not an assessment order and should not be described as one. What it is, and this is the more useful half when a Danish caseworker is deciding whether to recognise it, is an act with legal consequences: Section 156 deems it a notice of demand where a sum is payable, Section 246A makes it appealable, and Section 154 allows it to be rectified. 3. Build the reconciliation. Form 26AS (Form 168 from FY 2026-27) and the AIS give you tax deducted and refunds received; the tax finally payable comes off the intimation. Reconcile the three, per source. 4. Recut those figures onto the calendar. Your Indian year runs April to March and the Danish year is the calendar year, so one Indian year feeds two Danish ones and the credit has to be apportioned before anyone can claim it. 5. Claim the Indian refund of everything India took above your final Indian liability. That liability is the lower of your ordinary Indian tax on the income and the treaty ceiling, not the treaty ceiling by default. Denmark will not credit the excess, so India is the only route back.

Where Skattestyrelsen wants a document rather than a working, that is the India tax paid certificate a practising CA issues with a UDIN. The general shape of this mismatch, for every country rather than Denmark, sits on why your foreign tax credit lands in the wrong year.

If the Indian year was never filed and there is a refund sitting in it, the updated return is the wrong instrument. Section 139(8A) now runs 48 months from the end of the assessment year, with additional tax rising from 25% to 70% the longer you leave it, but it is barred wherever the update would reduce the total tax liability you originally declared, or produce a refund, or increase one. It is built for declaring more income, not for recovering over-deduction.

The route for a stranded refund is condonation of delay under Section 119(2)(b). CBDT Circular 11/2024 sets the limits: no condonation application for a refund or loss claim is entertained beyond five years from the end of the relevant assessment year, and applications are routed by size, with Principal Commissioners handling claims up to Rs 1 crore.

One thing that route does not carry is interest. The same circular says a condoned refund carries no interest under Section 244A, and even on an ordinary late return the interest clock generally starts when you file rather than at the beginning of the assessment year. So the delay costs you the interest as well as the risk.

Sequence matters here in a way people miss. The Danish reopening depends on a settled Indian tax, so the Indian condonation has to land first. And the five-year Indian limit and the four-year Danish one are running at the same time, from different start dates, on the same money.

Article 23(3)(d) and (e) of the treaty look like they hand you credit for Indian tax you never paid. Whether they do turns on a Protocol most summaries skip, and the answer is different for interest than it was in the Danish rulings on royalties and technical fees.

Article 23(3)(d) deems Indian tax paid to include tax that would have been payable but for an exemption or reduction under a named list of 1961 Act sections, including 10(4) and 10(15)(iv). The list is frozen: it counts only so far as those sections were in force on, and have not been modified since, the date the Convention was signed on 8 March 1989, or modified only in minor respects. A section rewritten since then falls outside it.

Article 23(3)(e) then says Indian tax on interest shall never be treated as paid at less than 10% for banks and 15% otherwise, and 20% on royalties and fees for technical services. Note what is missing from that list: dividends and capital gains are not in it.

And point 1 of the clarifying Protocol caps the whole thing: those rates shall in no case exceed the withholding rate India actually applies to that category of income. Skatteradet applied exactly that in SKM2021.649.SR, where the treaty's 20% floor on technical fees was cut back to the 10.4% India actually charged.

Run the same arithmetic on NRO interest and it comes out the other way. India's domestic withholding rate on interest paid to a non-resident is 30% plus cess, far above the treaty's 15% floor, so the Protocol cap has nothing to cut back. What that means where you actually bore less than 15% is not settled: the text of (e) is unconditional, while Skattestyrelsen introduces (d) and (e) together as a matching credit for cases where India granted an exemption. That is a question to put to Skattestyrelsen before anyone builds a number on it, not an assumption.

One related myth is worth killing while you are here. There is a bilateral protocol to this treaty, signed 10 October 2013 and in force from 1 February 2015, so anyone telling you about a 2015 protocol is half right. Everything it does is confined to the exchange-of-information article. It left the rates, the credit article and the matching credit exactly as they were.

Meera loses nothing, and only because her Indian return was processed quickly.

She also lets out a flat in Chennai, so she already has enough Indian income to sit in the top Indian slab. Her NRO deposits then paid Rs 3,00,000 of interest in the Indian year to 31 March 2022. The bank had no treaty paperwork on file, so it deducted at 30% plus the 4% cess, which is Rs 93,600.

Work out her real Indian liability before anything else, because the treaty rate is a ceiling on India, not a rate she pays automatically. NRO interest is ordinary income taxed at her slab, which at her level would be more than 15% of the gross. Article 12(2)(b) caps India at 15%, or Rs 45,000, and Section 90(2) lets her take whichever is more beneficial. So the treaty ceiling is what binds and Rs 45,000 is her final Indian tax on that interest.

That ceiling is not automatic. It needs a Danish tax residency certificate under Section 90(4) and Form 10F under Section 90(5), it applies to the gross interest so nothing comes off for expenses, and Article 12(5) switches it off entirely where the deposit is effectively connected with a permanent establishment she has in India.

Change one fact and the Indian answer moves. If the interest were her only Indian income, her slab tax would come out well below the 15% ceiling, so her final Indian tax would be a fraction of Rs 45,000 and the Indian refund correspondingly larger. The treaty rate is not the answer, it is one of two numbers you compare. What that does to the Danish credit is a separate question, and the matching-credit rule above is why it is not simply the smaller number.

The Rs 45,000 does not all belong to one Danish year either. Nine months of that interest fell in Danish 2021 and three months in Danish 2022, so the credit is apportioned across both.

Her return was processed in early 2023, well inside the ordinary window, which for Danish 2021 ran to 1 May 2025. Had the Indian side dragged to 2027 instead, Danish 2021 would have been shut, and she would have been arguing that an Indian processing intimation is a foreign authority's decision Skattestyrelsen should recognise, with six months to do it in.