Form 67 & Claim Of Foreign Tax Credit For NRIs

Non-resident individuals may feel overwhelmed when managing their financial affairs across borders, primarily due to concerns about paying taxes on the same income source. If this applies to you, understanding the foreign income tax credit (FTC) is essential, as it enables NRIs to avoid unnecessary tax burdens.

The foreign tax credits enable the NRIs to avoid being taxed twice on the same income source. As per section 90 of the Income Tax Act, the Double Taxation Avoidance Agreement of India with different countries reduces tax liability. To claim the benefit of this agreement, taxpayers must submit Form 67 of Income tax Act before filing their income tax return in India.

In this blog, we will explore the Foreign Tax Credit, its importance for NRIs, who can claim it, and how.

What is Foreign Tax Credit (FTC)?

The Foreign Tax Credit (FTC) helps you avoid double taxation on the same income source. As a non-resident Indian, when you pay taxes abroad on your earnings made abroad, the foreign tax credit FTC permits you to reduce your Indian tax liability by that amount.

NRIs are likely to generate income in multiple countries, and without the FTC, they might face double taxation. Let us understand how:

For instance, Mr. Aman is a tax resident in Indian who holds shares of Apple Inc. listed on the US stock exchange. He received $2000 as a dividend from Apple Inc. According to the India-US DTAA, the United States will hold 25% of the taxes at source. This way, Mr. Aman will get only $1500 in his bank account. Now, as Mr. Aman is a tax resident in India, while declaring such income in his ITR, he has to declare the entire $2000 because global income is taxable in India.

However, with the provisions under the double taxation avoidance agreement (DTAA), Mr. Aman is eligible to claim the credit for the taxes he has already paid in the United States. This is how:

Foreign tax credit is a concept of claiming a deduction or credit of taxes paid in the source state against the tax liability in the state of residence.

FTC Concept In India

According to the Indian tax law, sections 90 and 91 deal with Foreign Income Tax credit. Section 90 of the Indian Income Tax Act states that claiming FTC in a case where India has a DTAA with another country. Section 92 pertains to claims of the FTC in cases where India has not entered into a double taxation avoidance agreement with the country.

Who can Claim Foreign Tax Credit?

Irrespective of the residential status, to claim the benefit for a foreign tax credit, one must meet a specific eligibility criterion with proper documentation. You are eligible to claim FTC if you have paid taxes in a foreign country on an income source that is taxable in India. It applies to:

• NRIs who are tax residents of foreign countries.
• Indian residents who earn income abroad.

Apart from the individual's residency status, what truly matters is whether they have paid taxes overseas on an income source that is also taxable in India. Moreover, the foreign taxes must also be similar to the Indian income tax to claim a foreign tax credit.

Documents Required to Claim FTC

As an NRI to claim foreign tax credit, there are certain documents that you must keep handy.

1. Form 67: This is mandatory; without it, you cannot claim an FTC, and it must be filed before the date of your income tax return.
2. TRC: Tax Residency Certificate for the foreign country.
3. Payment Proof: Proof of the gross tax payment, like the statements, tax receipts, or challan.
4. Other Documents: If applicable, you might also need the foreign tax return copy with the assessment order. Apart from this, also keep in handy the income statements showing the amount and source of foreign income.

Claiming a foreign tax credit is nothing like a random tax deduction. This is required through a series of comments to verify both your foreign income and the taxes you pay on it. Hence, ensure you have the documents handy and that each of them is translated into English if they are in a foreign language.

Timing Consideration

It is to ensure that Form 67 is filled out before filing the ITR and not after it. If a taxpayer's FTC is under dispute, they can claim it once the dispute is settled by submitting proof and evidence within six months.

To maximize its tax savings, the taxpayer must understand that the credit is obtained by comparing the payable tax under Indian tax laws with the tax paid abroad, and the lower amount is granted as a relief. This entire calculation ensures the taxpayer is not overclaiming the credit more than it is granted under the Indian taxation laws.

NRIs must remember that documenting everything properly would help in claiming the foreign tax credit and avoiding unnecessary security.

How to Claim Foreign Tax Credit in India

For an NRI to claim foreign tax credit in India, they must file Form 67 via the income tax e-filing portal before submitting their annual Income tax return. To do so, the taxpayer must be registered with the income tax e-filing portal with an active and valid user ID, password, and an active PAN that is linked to their Aadhar.

Let us First Know How to File Form 67

Step 1: Log in to the income tax e-filing portal using your user ID and password.

Step 2: Now, on the dashboard, click 'e-file', and then click on Income Tax Forms and select File Income Tax Forms.

Step 3: When redirected to the next page select Person not depend on any source of Income, and then proceed to the next subpage. Now, click on the "file now" next to Double Taxation Relief (Form 67).

Step 4: Select the "Assessment Year" and then click on continue.

Step 5: Now, on the instructions page, click on "Let's get started".

Step 6: Form 67 will now be reflected on your screen. Fill in all the asked details and then click on "Preview".

Step 7: Now, verify the details and ensure that all the proof of tax withholding and supporting documents are accurately uploaded. Once done, now click on proceed to e-verify.

Step 8: A confirmation message will be displayed, click on yes to submit the form.

Step 9: The page will now redirect you to the page. After the e-verification went successfully, a message will be displayed along with the acknowledgment number and transaction ID.

Form 67 consists of four main sections: Part A for income details and basic information, Part B for refund details, an attachment section for uploading proof of foreign tax payment, and the verifications section.

Some of the Important Documentation Required Includes:

• A certificate from the foreign tax authorities.
• Proof of foreign tax payment or deduction.
• Foreign Income documents.

Form 67 Due Date Of The Assessment Year 2025-2026

However, as per the latest amendment made by the Central Board of Direct Taxes (CBDT), Form 67 can now be filed before the end of the relevant assessment year if the taxpayer has filed their return within the stated period in Section 139(1) or 139(4). However, ensure that the return under section 139(8A), Form 67, must be filed before submitting the updated return.

Filing Form 67 after the end of the assessment year will not make the taxpayer eligible to claim the credit; however, they can still apply for the condonation for delayed submission if a valid and genuine reason.

Need Help With FTC: Expert Help Just A Click Away

As an NRI, claiming foreign tax credit is a smart way to avoid being double-taxed on the same income source, hence reducing your overall tax liability. However, you must ensure the filing of Form 67 before the tax return, maintain detailed tax records on the taxes paid in foreign countries, and identify whether you must qualify under section 90 (DTAA) or section 91 (non-DTAA).

However, juggling through all this can feel overwhelming, especially when you are an NRI. That's when an expert can help you solve all these issues. We at Savetaxs view foreign tax credit (FTC) as a valuable financial planning opportunity to help our clients maximize their global earnings, as the right approach can make FTC an essential resource for NRIs. We ensure that all documentation is accurate and that the entire procedure proceeds smoothly.

We have been helping NRIs for decades now, and our satisfied clientele base speaks for the kind of services we offer. Connect with us today so we can help navigate these tax complexities with confidence.