Rule 128(2) says foreign tax shall mean the tax covered under DTA agreement.

Article 2 of the DTAA deals only with Federal Income-taxes and excludes

• Accumulated earnings tax,

• Personal holding company tax and

• Social security tax

Article 2 of DTAA does not make reference to state tax payable in USA, Canada. FTC credit on state tax paid remains unanswered

In Pritesh Rajesh Kotak case – Tax credit u/s 91 being beneficial it allows both the types of income-taxes for the purpose of tax credit subject to average rate of tax.

Also in Sunil Shinde case [2017] 166 ITD 597 (Bang-Trib) case ITAT held that tax withheld in US would not constitute income that accrued or arose outside India as per section 5(1)(c) as the same was not received by the taxpayer. And medicare paid outside India is not taxable as it is contingent in nature

So federal tax , state tax , medicare tax withheld/paid ,will not form part of the total income.