Are you an Indian resident earning income abroad? You might be facing double taxation - paying tax in the foreign country and again in India. But fret not! The Indian tax department offers a handy solution - foreign tax credit. This credit allows you to claim relief for taxes paid overseas, reducing your overall tax burden in India.
In this blog series, we'll guide you through the process of claiming foreign tax credit using Form 67, with the help of insights from CA Vikas Jain's FAQs. We'll cover everything you need to know, from eligibility to submission, ensuring a smooth claim process.
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By the end of this series, you'll be well-equipped to claim your rightful foreign tax credit and avoid double taxation in India. Let's get started!
Introduction
With the world getting smaller, many Indian taxpayers are earning income overseas. This can be from international businesses, working abroad, or even overseas investments. This can lead to the hassle of double taxation, where you pay tax on the same income in both India and the foreign country. But fear not! The Indian government offers a helping hand through the Foreign Tax Credit (FTC). This allows eligible taxpayers to claim relief and avoid paying taxes twice. This guide will explain everything you need to know about claiming FTC in India using Form 67.
What is Foreign Tax Credit (FTC) and Form 67?
The FTC acts like a shield against double taxation. It lets you use the taxes you already paid abroad to reduce your Indian tax bill. Form 67 is your key to claiming this credit. Here's where it comes in: you fill out the form with details like your foreign income, the foreign taxes you paid, and the Double Taxation Avoidance Agreement (DTAA) that applies. This ensures you only pay tax once on the same income and get the credit you deserve for the taxes you paid overseas.
Due Date for Filing Form 67
There's a deadline to claim your FTC with Form 67. According to Rule 128, residents must submit it by December 31st of the assessment year. Think of it like this: if you filed your income tax return for 2023-2024 by October 31st, 2024, the deadline to claim your credit with Form 67 is still December 31st, 2024.
Criteria required to claim the FTC
To claim the Foreign Tax Credit (FTC), you'll need proof of the taxes you paid abroad. This can come in a few forms:
Proof of Tax Withholding: Similar to India's TDS/TCS certificates (Form 16/16A/16C), you might receive a certificate from the person or entity that deducted your taxes abroad. This will show the type of income and the amount of tax withheld.
Proof of Tax Payment: If there was no withholding, you'll need proof that you directly paid the tax yourself. This could be an acknowledgement of online payment, a bank receipt (counterfoil), or a tax payment challan.
Proof of Tax Return Filing: In some cases, your foreign tax return or a certificate from the foreign tax authority can serve as proof of both your income and the taxes you paid.
Don't have any of these documents? In rare cases, you can submit a self-signed statement detailing your foreign income and taxes paid. However, this is a less preferred option.
Things to be kept in mind for Form-67
Important points to remember about claiming FTC:
No Refunds or Carry over: The Indian tax department won't refund any foreign taxes you paid, nor can you carry them forward to future tax years. You can only claim them as a credit against your current tax liability.
FTC for Specific Taxes: The FTC can only be used to reduce your income tax, surcharge, and cuss. It doesn't apply to interest, penalties, or fees.
Lower Tax Wins: You can only claim a credit for the lesser amount - the tax you owe in India or the foreign tax you paid.
One Form, Many Countries: You can claim FTC for income from multiple countries using a single Form 67.
Conversion Rate: The foreign tax amount needs to be converted to rupees using the Telegraphic Transfer Buying Rate set by SBI on the last day of the previous month before the tax was paid/deducted.
Separate Calculation: Calculate the FTC for each income source separately before adding them up to get the total credit.
Claiming in the Right Year: You can only claim FTC for foreign income that is also taxed in India during that same tax year.
Steps to fill and submit Form 67
Head to the Income Tax e-Filing website: Log in using your user ID and password.
Navigate to the filing section: On the main page, click "e-File" followed by "Income Tax Forms" and then "File Income Tax Forms".
Select Form 67: Look for "Form 67" on the list and choose it.
Choose the tax year: Select the "Assessment Year (AY)" that applies to your claim.
Start filling out the form: Click "Let's Get Started" to begin filling out the details in Form 67.
Review and submit: Once you've filled everything, click "Preview" to check your entries. If it looks good, click "Proceed to E-Verify".
Verify your submission: A confirmation message will pop up. Click "Yes" to submit the form electronically.
Confirmation: After successful verification, you'll see a success message with a transaction ID and acknowledgement number for your records.
Conclusion:
Filing Form 67 is an important part of paying your taxes correctly. It helps ensure you're reporting all your income accurately and following the rules. By filing it on time and with the right information, you contribute to a fair and efficient tax system for everyone.
Here's what Form 67 does:
Shows your foreign income: It lets the tax department know about any income you earned outside India.
Helps you claim tax benefits: It allows you to claim credit for taxes you already paid abroad, so you don't get taxed twice on the same income.
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