If you’ve earned income abroad and paid taxes on it, you can claim a credit to avoid double taxation.
Here’s a step-by-step guide on how to claim Foreign Tax Credit (FTC) while filing your Income Tax Return (ITR) in India.
Understanding Foreign Tax Credit (FTC)
When a taxpayer earns income abroad, it is subject to taxation in both the foreign country and India, leading to double taxation.
To mitigate this, the Indian government has introduced the FTC system. This ensures that taxpayers do not pay tax twice on the same income.
Legal Provisions for FTC: Sections 90 and 91
Section 90
This section covers FTC when India has Double Tax Avoidance Agreements (DTAA) with the foreign country. It allows taxpayers to claim credit for taxes paid abroad, based on the agreement.
Section 91
This section applies when India does not have a DTAA with the foreign country. It allows taxpayers to claim credit for taxes paid abroad, ensuring they don’t pay double taxes on the same income.
Filing Form 67 for FTC Claims
To claim FTC, taxpayers must file Form 67 during or before the end of the assessment year, provided they have filed their ITR within the deadline. Here’s how to do it:
- Log in to the Income Tax Department Portal: Access the official portal and log in with your credentials.
- Navigate to Income Tax Forms: Select ‘Income Tax Forms’ from the ‘e-file’ menu.
- Fill in Foreign Income Details: Enter all details of your foreign income and the taxes paid abroad.
- Provide Proof of Tax Payment: Upload necessary documents such as tax payment receipts, tax deduction certificates, or any official documents verifying tax payment.
- Submit Form 67: Complete the form and submit it online.
Authenticate the submission using an Electronic Verification Code (EVC) or Digital Signature Certificate (DSC).
Required Documentation
According to Rule 128, taxpayers need to submit several documents before the ITR filing due date:
- Statement of foreign income
- Certificate or statement from the foreign tax authority
- Proof of tax payment
Note: FTC cannot be claimed if there is any dispute regarding the tax paid abroad.
By following these steps, taxpayers can efficiently claim FTC and avoid the burden of double taxation on their foreign income.
