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Form 67 – A Comprehensive Guide to Claiming Foreign Tax Credit (FTC) in India

Introduction

With globalization and cross-border trade, many Indian taxpayers earn income from foreign sources. This creates a possibility of double taxation, where income is taxed both in the foreign country and in India. To mitigate this burden, the Income Tax Act, 1961, allows taxpayers to claim Foreign Tax Credit (FTC) under Section 90, Section 90A, and Section 91.

Form 67 is a mandatory compliance requirement for taxpayers seeking FTC relief. It ensures that foreign taxes paid are credited against Indian tax liability, preventing double taxation.

This article provides a detailed explanation of Form 67, its applicability, eligibility criteria, filing procedures, deadlines, and the latest regulatory updates.

Legal Framework Governing Foreign Tax Credit (FTC) in India

1. Sections Allowing Foreign Tax Credit

  1. Section 90 & Section 90A
    • Deals with tax relief under Double Taxation Avoidance Agreements (DTAA) signed between India and other countries.
    • Ensures tax credits for taxes paid in a foreign country as per the agreement.
  2. Section 91
    • Applicable when India has no DTAA with the foreign country where income is earned.
    • Provides unilateral relief, allowing FTC for foreign taxes paid, subject to limits.

2. Rule 128 – The Governing Rule for FTC

Rule 128 of the Income Tax Rules, 1962, lays down the conditions for claiming Foreign Tax Credit (FTC), including:

  • FTC can be claimed only if foreign income is included in Indian total income.
  • FTC cannot exceed the total tax payable in India on the foreign income.
  • Form 67 must be submitted before filing the Income Tax Return (ITR).

Who Should File Form 67?

  • Resident taxpayers who have earned foreign income and have paid tax abroad.
  • Indian businesses with overseas operations, paying corporate tax in another country.
  • Freelancers, consultants, and professionals earning income from foreign clients.
  • Non-resident Indians (NRIs) filing tax returns in India for global income.

Importance of Form 67

  • Mandatory for claiming FTC. Without it, credit for taxes paid abroad will not be allowed.
  • Helps the Income Tax Department track global income disclosure.
  • Prevents double taxation, ensuring fair tax liability.
  • Required for audit and tax compliance under global tax treaties.

Filing Procedure for Form 67

Step 1: Gather Required Documents

  • Tax payment receipts or challans from the foreign country.
  • Income tax return filed in the foreign country (if applicable).
  • Foreign income statements such as salary slips, dividend records, or business receipts.
  • DTAA agreement (if applicable) for reference.

Step 2: Log in to the Income Tax Portal

Step 3: Navigate to Form 67

  • Under the “e-File” menu, select “Income Tax Forms” → “File Income Tax Forms” → Search for Form 67.

Step 4: Fill in the Required Details

  • Foreign country name where income was earned.
  • Foreign tax paid (converted to INR using RBI exchange rate).
  • Nature of income (salary, business, capital gains, etc.).
  • Breakup of total Indian tax liability on such foreign income.

Step 5: Upload Supporting Documents

  • Attach foreign tax payment proof and ITR of the foreign country (if applicable).

Step 6: Submit Before Filing ITR

  • Form 67 must be filed before submitting the ITR for the relevant assessment year.
  • Once submitted, claim FTC under Schedule FSI (Foreign Source Income) while filing ITR.

Conditions for Claiming FTC

  1. Only taxes that qualify as “income tax” in the foreign country are eligible for FTC.
  2. Non-refundable taxes such as sales tax, VAT, or GST are not eligible.
  3. FTC cannot be claimed for penalty, interest, or surcharge paid in a foreign country.
  4. Foreign tax paid must be consistent with the DTAA (if applicable).
  5. Excess FTC (if not utilized fully) cannot be carried forward.

Latest Updates on Form 67 & FTC (As Per Finance Act, 2022)

1. Relaxation in Form 67 Filing Deadline

  • Earlier, non-filing of Form 67 before ITR led to denial of FTC.
  • Now, taxpayers can file Form 67 even after filing ITR, provided it is before the assessment is completed.

2. Online Automation in IT Portal

  • The e-filing system now auto-calculates eligible FTC based on input data.

3. Changes in FTC Calculation for Businesses

  • FTC for foreign corporate tax is now aligned with MAT (Minimum Alternate Tax) calculations for Indian companies.

Judicial Precedents Supporting FTC Claims

  1. Wipro Ltd vs. DCIT (2020) 121 taxmann.com 243 (Karnataka HC)
    • The court held that FTC cannot be denied merely due to technical non-compliance with Form 67 filing deadlines.
  2. Tata Sons Ltd vs. ACIT (2021) 126 taxmann.com 368 (ITAT Mumbai)
    • Clarified that FTC should be allowed even if foreign taxes are paid after the Indian financial year ends.

Common Errors While Filing Form 67 & How to Avoid Them

 Incorrect exchange rate conversion → Use RBI’s exchange rate on the last day of the financial year.
 Filing after ITR deadline → Must be filed before or along with ITR submission.
 Claiming ineligible taxes → Ensure only income tax and withholding taxes are included.
 Missing documentation → Always attach proof of foreign tax payment.

Conclusion

Form 67 plays a crucial role in eliminating double taxation and ensuring that Indian taxpayers get relief for taxes paid abroad. Compliance with FTC rules and timely filing is essential to avoid tax disallowance and ensure smooth cross-border taxation.

With recent relaxations and automation, Form 67 filing is now more streamlined, making it easier for taxpayers and businesses to claim their rightful tax credits.

Taxpayers should consult Chartered Accountants or tax professionals to ensure they maximize FTC claims while staying compliant with Indian tax laws.

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