What is a foreign tax credit?

As you know, people residing in the home country (India) get several opportunities of job or work. Because of that, they have to travel often from India to foreign countries. Such people need to pay taxes in their country of work (where they work temporarily) as well as again taxed after coming back to India.

If you are an Indian resident, you need to pay taxes on your global income as per Indian tax laws, due to which you end up giving tax twice on the same income. To avoid such problem, Double Taxation Avoidance Agreement (DTAA) is signed by both the concerned countries on mutual understanding. Individuals don’t have to pay tax twice and can claim a tax deduction against tax liability in India. This process of claiming a deduction or tax credit in your residence country or specified territory for the taxes paid in the other country is known as a foreign tax credit.

Claim Foreign Tax Credit in India

Concept of Foreign tax credit

Foreign tax credit includes 2 different states –

  1. The residence state (Resident country of the taxpayer)
  2. The source state (Country where the taxpayer working and receiving income)

As per the Indian tax laws, there are two scenarios in which the income tax act deals with the concept of the foreign tax credit, i.e. Section 90 and Section 91. Section 90 is created to handle scenarios where India has signed a Double Taxation Avoidance Agreement (DTAA) with the other country, whereas Section 91 is created to handle scenarios where India hasn’t signed a Double Taxation Avoidance Agreement (DTAA) with another country. In the past, there was some confusion related to a foreign tax credit resolved after introducing Rule 128 and Form 67.

After the introduction of rule 128, it becomes clear that tax credits can only be availed by the residents of India and on the amount you have paid as taxes in the other country. However, tax credits can only be availed if your income is getting accessed in the same year in which you are claiming the credits.

As per notification under rule 128 w.e.f 1.04.2017, FTC rules have been notified to clear ambiguity around its claims, and some of the rules captured briefly are as under –

  1. Foreign tax credit (FTC) can only be claimed if you are a resident of India.
  2. Foreign tax credit (FTC) can only be claimed in the same year when your income gets accessed to tax in India.
  3. As per Indian tax laws, Foreign tax credit (FTC) shall only be claimed against the tax amount, surcharge & cess payable but not against fee, penalty or interest.
  4. Foreign tax credit (FTC) shall not be availed in the case of disputed foreign tax.
  5. Foreign tax credit (FTC) can also be availed on tax payable under section 115JB (Minimum Alternate Tax).
  6. Foreign tax credit (FTC) shall be an aggregate of all the tax credits computed separately for each income source arising from a particular country.
  7. Foreign tax credit (FTC) shall be lower of the following –
    1. Foreign tax paid, or
    2. Tax payable on income under Indian tax laws.
  8. Foreign tax credit (FTC) is determined by currency conversion of foreign tax payment at Telegraphic transfer buying rate on month’s last day, immediately preceding the month in which tax has been deducted or paid by the taxpayer.

What is Form 67?

Form 67 is an important document required to be filed by the taxpayer in order to claim a foreign tax credit (FTC). This form should be filed by the taxpayer on or before the due date of filing an income tax return under section 139(1) of the income tax act.

Documents required to be furnished for claiming foreign tax credit (FTC)

In accordance with Rule 128, the taxpayer needs to file the following documents on or before the due date of return filing –

  1. A Statement of –
    1. Foreign income offered to tax
    2. Foreign tax paid or deducted on the income earned by the taxpayer outside the country.
  2. A Statement or Certificate specifying the nature of income or the tax amount deducted or paid by the taxpayer –
    1. Given by the tax authority of the foreign country
    2. Given by the person responsible for a tax deduction
    3. Signed by the taxpayer
  3. Evidence of tax payments made outside India such as acknowledgement of online tax payment, bank counterfoil or bank challan for tax payment.

Online procedure for filing & submitting form 67

On 9th September 2017, CBDT has released the online filing procedure of form 67 which are as follows –

  1. Form 67 shall be available to all taxpayers in their accounts online.
  2. Taxpayers need to login into the official E-filing portal of Income-tax www.incometaxindiaefiling.gov.in/home by using their login credentials.
  3. Choose “E-file” from the given menu and then click on “income tax forms” (other than ITR).
  4. Select form 67 and choose the assessment year from the drop-down menu along with the submission mode. Instructions for filing form 67 are already enclosed along with the form.
  5. Click on "Let's get started" and fill in the required details in "Form 67".
  6. After filling “Form 67”, submit it online by clicking on the “Submit” button.
  7. Taxpayers must certify with “Digital Signature” or “Electronic verification code” to submit form 67.

Format of Form 67

Download ITR Form 67 by clicking the below button-


Filling and submission of Form 67

  1. Form 67 shall be accessible through each taxpayer's login. The taxpayer must use authentic login credentials to access the e-filing portal. Under "E-file-Prepare and submit online forms (other than ITR)," a link to the form has been provided.
  2. From the drop-down menu, select Form 67 and the AY.
  3. Instructions for completing the form are contained with Form 67. By clicking on the submit button, you can submit the completed form 67. Additionally, you can save the completed form as a draft so that you can make changes later (If any) and then submit it.

Form 67 FAQ

What is the purpose of submitting Form 67?

If you wish to claim credit for foreign tax paid in a country or specified area outside India, you must complete Form 67. Additionally, you will be required to submit Form 67 if you carry back a current-year loss that results in a refund of foreign tax for which credit was claimed in previous years.

What are the modes for submitting Form 67?

Form 67 must be submitted electronically via the e-Filing portal. After logging into the e-Filing portal, go to Form 67, fill the same and submit it.

In case you want to ask any question related to ITR Form 67 and want to claim foreign tax credit in your income tax return, kindly call us on 8800221252 or you can also e-mail us at info@finacbooks.com

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