If you are an Indian resident who has already paid tax on income earned outside India, you may not have to pay tax on the same income twice.
The Income Tax Department allows eligible resident to claim a Foreign Tax Credit (FTC) by filing Form 67 along with the supporting documents.
What is foreign tax credit?
A foreign credit allows Indian residents to reduce their tax liability in by claiming credit for taxes already paid in another country on the same income. The provision is governed by Rule 128 of the Income Tax Rules, 1962.
Suppose Mahesh, an Indian resident, earns ₹2 lakh as freelance income from a client in the US. The US deducts ₹20,000 as tax before making the payment.
Since Mahesh must also report this income in his Indian income tax return, and his tax liability in India on the same income is ₹30,000, he can claim a foreign tax credit of ₹20,000 by filing Form 67.
As a result, he will only need to pay the remaining ₹10,000 in India, avoiding double taxation on the same income.
What information does Form 67 contain?
The form is divided into two parts.
Part A: Taxpayer and foreign income details
- Basic details such as PAN, name, address and assessment year.
- Details of foreign income and the Foreign Tax Credit claimed.
Part B: Foreign tax adjustments
- Information relating to refund of foreign tax due to carry backward of losses.
- Details of any disputed foreign tax.
What you need before filing Form 67?
Before filing Form 67, ensure that:
- You are registered on the Income Tax e-filing portal.
- Your PAN is active and is linked with an Aadhaar card.
- You have the necessary documents supporting foreign tax payment and proof of tax deduction in the foreign country.
How to file Form 67 online?
Step 1: Sign in to the e-filing portal using your login credentials.
Step 2: From the dashboard, navigate to e-file, then select ‘File Income Tax Forms.’
Step 3: Select or type Form 67 in the search bar and open the form.
Step 4: Select the applicable Assessment Year.
Step 5: Enter details of your foreign income, taxes paid overseas, and the Foreign Tax Credit being claimed. Upload the required supporting documents.
Step 6: Confirm that all details are correct and complete the e-verification.
Once the process is complete, the portal will issue an Acknowledgement Number and Transaction ID as proof of successful filing.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.