Form 67 Claim Foreign Tax Credit (FTC)

What is Foreign Tax Credit (FTC)?

Foreign Tax Credit is a claim deduction given to an individual on income earned in a source state. As the name suggests, source state is where an individual receives income, indifferent from the resident state (individual’s home country). Since the income is earned in a foreign state, an individual would have to pay taxes on the income as per the prevailing laws of the source state. The resident state will tax the same individual on the basis of global income. This would result in the taxpayer getting taxed on his income twice i.e. once in the source state and once in the residence state. To prevent such a scenario of double taxation, the residence state allows a deduction of taxes paid in the source state from the total tax liability in the residence state.

What is Form 67?

For an individual taxpayer who seeks to claim Foreign Tax Credit, he/she will be required to furnish Form 67 to do the same. It is important to furnish Form 67 on or before the due date of filing return of income under Section 139(1) of the Income Tax Act, 1961.

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Procedure for filing Form 67

The Central Board of Direct Taxation has created a standard procedure for filing Form 67.

For taxpayers who file their ITR electronically, Form 67 is to be prepared and submitted online.
Visit the official e-portal of the income tax department and login with your registered ID and Password.
Select the link for filing the form under E-file-Prepare and submit online forms (Other than ITR).
Select Form 67 and the assessment year.
Submit the form.
Additionally, the taxpayer will be required to submit their Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).

Note: The taxpayer needs to submit Form 67 before filing of return of income.

The Concept of Foreign Tax Credit

As per the Income Tax Act, 1961, Section 90 and 91 deal with the concept of FTC. Section 90 narrates and initiates discussions in a scenario where India has entered into a Double Taxation Avoidance Agreement (DTAA) with another country and such DTAA provides for claiming of FTC. Section 91 narrates and initiates discussions with claiming of FTC in scenarios where India has not entered into a DTAA with the country where the income arises for a taxpayer. If the taxpayer had paid taxes outside India, he/she can claim a credit of such foreign taxes paid against their tax payable in India.

Here are certain rules and regulations regarding Foreign Tax Credit.

FTC is allowed in the year in which the income, corresponding to this tax, has been assessed to tax in India.
FTC is available against the amount of tax, surcharge and cess payable under the Indian tax.
FTC is not available if the foreign tax is under some type of dispute.
FTC is available on tax payable under Section 115JB (Minimum Alternate Tax).
FTC comprises of aggregate amounts of credit computed separately for each source of income arising from a particular country.
FTC is determined by conversion of the currency of payment of the foreign tax at the Telegraphic Transfer Buying Rate on the last day of the month immediately preceding the month in which such tax has been paid or deducted.

Documents required for claiming Foreign Tax Credit

As per Rule 128, a taxpayer is required to furnish the following documents for claiming Foreign Tax Credit:

Statements

Showcasing foreign income offered to tax.
Showcasing foreign tax deducted or paid on such income in Form No. 67.
Showcasing proof of payment of taxes outside India.

Certificates

Showcasing the nature of income and the amount of tax deducted from or paid by the taxpayer from the tax authority of the foreign country or from the person responsible for the deduction of such tax or signed by the taxpayer.

Frequently Asked Questions

When do I submit Form 67?

A taxpayer is required to submit Form 67 on or before the due date of filing of return.

What is a residence and source state?

Residence state is the home country of the taxpayer, while source state is a foreign country where the taxpayer is employed or receives income from.

What is DTTA?

DTAA stands for Double Taxation Avoidance Agreement. As per this agreement, the Indian government allows tax deductions to taxpayers who have earned income in a foreign country.

Where can I get Form 67?

Simply visit the official website of income tax department and select the Forms/Downloads section. Search for the respective form in the search engine and then you will be able to download it.

What is the full form of ROR and RNOR?

ROR and RNOR stands for Resident & Ordinarily Resident, while the latter stands for Resident but not Ordinarily Resident.