This Article is mainly focus on Foreign Tax Credit. As we all are aware that Foreign Tax Credit is a relief for taxes paid in foreign country is given to tax payer while taxing the same income in the home country. Therefore it is considered as one of the important factor while filing the Income Tax Return. This article will cover the aspects of Foreign Tax, its relevant rules, availability of credit its computation, the required documents and last but not the least as per amendment the latest procedure of online filing of Form 67.

Introduction of Foreign Tax Credit:

Section 295(2) (ha) of the Income Tax Act, 1961 provides that the CBDT (Board) may make Rules for the procedure for granting of relief or deduction, as the case may be, of any income tax paid in any country or specified territory outside India, under Section 90 or Section 90A or Section 91, against Income – tax payable under the said Act.

Concept of Foreign Tax:

In respect of a country or specified territory outside India with which India has entered into an agreement for the relief or avoidance of double taxation of income under Section 90 &  Section 90A.

In respect of any other country or specified territory outside India, the tax payable under the law force in that country in the nature of Income-tax as provided in Explanation to Section 91.

Relevant Rule related to Foreign Tax Credit: 

Rule 128 of the Income Tax (18th Amendment) Rules, 2016:

An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax in India.

Availability of Credit under Foreign Tax Credit:

The credit shall be available against the amount of tax, surcharge and cess payable under the Income Tax Act but not in respect of any sum payable by way of interest, fees or penalty.

Disputed Income for claiming Foreign Tax Credit:

No credit shall be available in respect of any amount of foreign tax which is under dispute in any manner. However, the credit will be allowed within six months from the end of the month in which dispute are finally settled.

Computation Method for claiming Foreign Tax Credit:

The credit of foreign tax shall be the aggregate of the amount credit computed separately for each source of income arising from a particular county or specified territory outside India.

Further,

1. The Credit shall be the lower of the tax payable under the Income Tax Act 1961 &

2. Same will be determined by conversion of the currency of payment of foreign tax at the telegraphic transfer buying rate on the last day of month immediately preceding month in which such tax has been paid.

Requisite Documents for claiming Foreign Tax Credit:

(i)  A statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein;

(ii) Certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,—

(a) from the tax authority of the country or the specified territory outside India; or

(b) from the person responsible for deduction of such tax; or

(c) signed by the assessee:

(iii) An acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee;

(iv) Proof of deduction where the tax has been deducted.

The Statement in Form 67 and the certificate shall be furnished on or before the due date specified for furnishing the return of income.

Please note that Form 67 shall also be furnished in a case where the carry backward of loss of the current year results in refund of foreign tax for which credit has been claimed in any earlier previous year or years.

Online submission of Form 67 for Foreign Tax Credit:

All assessee’s who are required to file return of income electronically under Section 139(1) r.w.r Rule 12(3) of the Income Tax Rules, 1962, are required to prepare and submit Form 67 online along with the Return of Income if the Credit for the amount of any foreign tax credit paid by the assessee in a country or specified territory outside India.

Procedure for online filing of Form 67

CBDT has released the procedure for online filing of Form 67 vide notification number 09 dated 19th September, 2017.

The procedure is as under:

1. Form 67 shall be available to all assessee’s login

2. The assessee is required to login into the e-filing portal using their valid credentials

3. A link for filing the Form has been provided under following path:

Go to E-file menu and then click on ‘Prepare and submit online forms (Other than ITR)’

4. Select Form 67 and assessment year from the drop down. Instructions to file the form are enclosed alongwith the form.

5. The completed Form 67 can be submitted by clicking on ‘submit’ button

6. Digital Signature Certificate or Electronic Verification Code is mandatory to submit Form 67

(Republished with Amendments)

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7 Comments

  1. Rajesh says:

    The company allotted ESOP shares of parent company in USA to the Indian employee in 2014, employee sold these shares in USA in 2018. In USA with holding tax deducted and balance sale proceeds remitted to the Indian bank account.

    Query: what is the tax treatment in India while filing income tax return and also let us know how to claim foreign tax credit refund and under which article of DTAA and what is the tax % should be considered in USA.

  2. siddharth says:

    What set of documents are required as part of A statement of Income from the country or specified territory outside India in Form 67 ?

    Like W2 Form or Salary Slips or Something else ?

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