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Learn what is foreign tax credit and how to claim it using form 67. This guide by H&R Block also discusses about the preparation of Form 67 and when to file it.

Claiming Foreign Tax Credit in India using Form 67

Last Update Date : April 25, 2018
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If you have worked or are still working abroad during the financial year and you are earning income for the same, some tax may have been deducted in that country on the foreign income. Also, if you are a Resident Indian as per the income tax rules, you will have to pay tax in India, on income earned anywhere in the world.

Taxability in India entirely depends on the source of income and residential status of an individual. While both Non-Resident (NR) and Not Ordinarily Resident (NOR) is taxed on the source of income earned in India, a Resident and Ordinarily Resident (ROR) is taxed on income earned worldwide.

What is Foreign Tax Credit?

Section 90 and Section 91 of the Income Tax Act, 1961, mention Foreign Tax Credit. Section 90 of the I-T Act includes a tax credit for countries where India has entered into a Double Tax Avoidance Agreement (DTAA) whereas Section 91 includes a tax credit for countries where DTAA isn’t applicable or isn’t in force.

Rule 128 was introduced along with Form 67 in the year 2016 and has come into force on 1st April 2017, so that all the uncertainties about the Foreign Tax Credit can be put to rest. As per Rule 128, the tax credit is available only for residents on the amount that they have paid as foreign taxes in the source country. Also, the tax credit will only be available if the income corresponding to the taxes is offered for tax or is assessed to tax in India in the year in which credit is claimed. Credit is given in the same proportion to which the income, for which foreign taxes are paid or deducted for more than one year, is offered as tax in India. Credit is given over the years.

Characteristics of Foreign Tax Credit

Foreign tax credit can be adjusted against tax, cess and surcharge payable under the Income Tax Act. However, it cannot be adjusted against penalty, interest or fee payable under the IT Act. You cannot avail the tax credit if the foreign tax or a part thereof is disputed, in any manner, by the assessee.

Credit of such disputed tax shall be allowed in the year in which such income is offered to tax in India, if within six months of the month of settlement of related dispute, you furnish evidence of settlement of dispute and an evidence to the effect that the liability for payment of such foreign tax has been discharged by you. This is subject to few other conditions stated in rule 128.

What is Form 67?

Form 67 is very important, and it needs to be submitted if you want to carry backward the loss of the current year which results in the foreign tax refund. According to Rule 128(9) of the income tax rules, you are required to submit a statement in Form 67 before the due date, if want to claim the credit after the tax return is filed. If you are required to file tax return u/s 139(1) electronically you will have to prepare and submit this form online along with it. Under the Income Tax Rules, 1962, claiming the foreign tax credit on the India tax return will be allowed only on submitting Form 67.

When it needs to be filed?

You need to furnish Form 67 on or before the due date of furnishing the tax return of income.

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Documents Required to File Form 67

You will have to attach supporting documents such as a certificate or statement that specifies the nature of the foreign income and the amount of tax deducted or paid by the taxpayer. This certificate or statement should be issued by the concerned tax authority of the foreign country or the specified territory or from the person who is responsible for the deduction (ex. employer).

Procedure for Filing Form 67

The CBDT has provided a procedure for filing Form 67, in the vide Notification no 9 on 19th September 2017. The procedure can be summarised as below:

  • The form is required to be submitted before filing the tax return.
  • Taxpayers who are required to file their tax return electronically should prepare and submit the form online.
  • This form is available on the e-filing portal of the Income Tax Department, in the taxpayers’ account.
  • Electronic Verification Code or the Digital Signature Certificate is imperative to submit the Form.

Preparation of Form 67

As a taxpayer, you will be required to login into the e-filing portal of the IT Department using your valid credentials. You shall then select Form 67 and the assessment year from the drop-down list. The first 4 points of the form include the basic information where the information is pre-filled. You can change/ modify the address if there is a need.

After filling information basic information, you can move on to point 5 and fill in the required details of income from a country or specified territory outside India and Foreign Tax Credit claimed. Let us explain each component to be filled in this part of the form.

  • Name of the country/specified territory: In column 2 select the name of the country or the territory outside India where you have received the income.
  • Source of Income: Each source of income should be declared separately in this column 3. Therefore, if you have salary income or income from house property, you will have to declare them separately.
  • Income from outside India: Mention the amount that you have received as income in the foreign country or specified territory outside India.
  • Tax paid outside India: Mention the tax paid on the income (salary, house property) received outside India.
    (a) Amount: Amount of tax paid
    (b) Rate: Rate at which tax has is paid
  • Tax payable on such income under normal provisions in India: The amount that you have paid as tax in India, on such foreign income.
  • Tax payable on such income under Section 115JB /JC: IF you are covered Alternate Minimum Tax then you have to mention the amount of minimum tax payable under the said provision.
  • Credit claimed under Section 90/90A: Applicable for people who work for countries that have entered Double Tax Avoidance Agreement with India.
    (a) Article No. of DTAA: Mention the relevant treaty article as per which the income is taxable
    (b) Rate of tax as per DTAA: The rate at which the relevant income is taxable under the DTAA
    (c) Amount: The total tax amount as per the rate at which the income is taxed under DTAA
  • Credit claimed under Section 91 Amount: Applicable for people who work or receive income from countries that have not entered Double Tax Avoidance Agreement with India.
  • Total Foreign Tax Credit claimed: After filling the details, this field will be auto-updated with the lowest amount of credit.

Instruction to fill the form is enclosed along with Form 67. You can submit the completed form 67 by clicking on the ‘submit’ button. You can also save the form filled as a draft so that you can make some changes later and then submit it.

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