FOREIGN TAX CREDIT (FTC)
FOREIGN TAX CREDIT – FTC: Foreign Tax credit is credit given by a country of taxes paid in another country
Table of Contents
What is Form 67
Form 67 is a document to claim foreign tax credit by a taxpayer. Form 67 has to be filed before filing of return of income. Income tax return has to be filed on or before the due date of filing income tax return
Income Tax section relating to Foreign Tax Credit (FTC)
- Section 90: Provides relief from double taxation of income in India
- Section 91: Provides unilateral relief from double taxation of income arising from a country with which India has not entered a DTAA
- Section 90A: Provides double tax relief to specified entity
Notification relating to foreign tax credit is attached below
Section 295 of Income Tax Act: Power to make rules
Section 295 (1): The Board may, subject to the control of the Central Government, by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the purposes of this Act.
Section 295 (2) (ha) provides that CBDT may prescribe procedure for granting of relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under this Act;
Section 90: Provides relief from double
CBDT Notification No 9 Dated 19th September 2017
Procedure for filing Statement of income from a country or specified territory outside India and Foreign Tax Credit
Foreign Tax Credit
An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in rule 128 of the Income tax (18th amendment) rules, 2016.
As per sub-rule 9 of rule 128 the statement in Form No.67 referred to in clause (i) of sub rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income.
In exercise of the powers delegated by Central Board of Direct Taxes (‘Board’) under rule 12(4) of the Income tax Rules 1962, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures:
1. Online filing of Form 67:
All assessee’s who are required to file return of income electronically under section 139(1) as per rule 12(3) of the income tax rules 1962, are required to prepare and submit form 67 online along with the return of income if credit for the amount of any foreign tax paid by the assessee in a country or specified territory outside India, by way of deduction or otherwise, i n the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India.
2. Preparation and Submission of Form 67:
Form 67 shall be available to all the assessee’s login. The assessee is required to login into the e-filing portal using their valid credentials. A link for filing the Form has been provided under “e-File -7 Prepare and Submit Online Forms (Other than ITR)”. Select form 67 and assessment year from the drop down. Instructions to fill the form are enclosed along with the form. The completed Form 67 can be submitted by clicking on “Submit” button. Digital Signature Certificate or Electronic Verification Code is mandatory to submit Form 67.
3. Submission of Form 67 shall precede filing of return of income
CBDT Notification No 54 Dated 27th June 2016 Foreign Tax Credit (FTC)
S.O.2213(E).─ In exercise of the powers conferred by clause(ha) of sub-section (2) of section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (18th Amendment) Rules, 2016.
(2) They shall come into force on the 1st day of April, 2017.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), after rule 127, following rule shall be inserted, namely:-
“128. Foreign Tax Credit–
(1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule:
Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India.
(2) The foreign tax referred to in sub-rule (1) shall mean,-
(a) in respect of a country or specified territory outside India with which India has entered into an agreement for the relief or avoidance of double taxation of income in terms of section 90 or section 90A, the tax covered under the said agreement;
(b) in respect of any other country or specified territory outside India, the tax payable under the law in force in that country or specified territory in the nature of income-tax referred to in clause (iv) of the Explanation to section 91.
(3) The credit under sub-rule (1) shall be available against the amount of tax, surcharge and cess payable under the Act but not in respect of any sum payable by way of interest, fee or penalty.
(4) No credit under sub-rule (1) shall be available in respect of any amount of foreign tax or part thereof which is disputed in any manner by the assessee:
Provided that the credit of such disputed tax shall be allowed for the year in which such income is offered to tax or assessed to tax in India if the assessee within six months from the end of the month in which the dispute is finally settled, furnishes evidence of settlement of dispute and an evidence to the effect that the liability for payment of such foreign tax has been discharged by him and furnishes an undertaking that no refund in respect of such amount has directly or indirectly been claimed or shall be claimed.
(5) The credit of foreign tax shall be the aggregate of the amounts of credit computed separately for each source of income arising from a particular country or specified territory outside India and shall be given effect to in the following manner:
(i) the credit shall be the lower of the tax payable under the Act on such income and the foreign tax paid on such income:
Provided that where the foreign tax paid exceeds the amount of tax payable in accordance with the provisions of the agreement for relief or avoidance of double taxation, such excess shall be ignored for the purposes of this clause;
(ii) the credit shall be determined by conversion of the currency of payment of foreign tax at the telegraphic transfer buying rate on the last day of the month immediately preceding the month in which such tax has been paid or deducted.
(6) In a case where any tax is payable under the provisions of section 115JB or section 115JC, the credit of foreign tax shall be allowed against such tax in the same manner as is allowable against any tax payable under the provisions of the Act other than the provisions of the said sections (hereafter referred to as the “normal provisions”).
(7) Where the amount of foreign tax credit available against the tax payable under the provisions of section 115JB or section 115JC exceeds the amount of tax credit available against the normal provisions, then while computing the amount of credit under section 115JAA or section 115JD in respect of the taxes paid under section 115JB or section 115JC, as the case may be, such excess shall be ignored.
(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:-
(i) a statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein;
(ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,
(a) from the tax authority of the country or specified territory outside India; or
(b) from the person responsible for deduction of such tax; or
(c) signed by the assessee:
Provided that the statement furnished by the assessee in clause (c) shall be valid if it is accompanied by,-
(A) an acknowledgment of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee
(B) proof of deduction where the tax has been deducted.
(9) The statement in Form No.67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income.
(10) Form No. 67 shall also be furnished in a case where the carry backward of loss of the current year results in refund of foreign tax for which credit has been claimed in any earlier previous year or years.”.
Explanation– For the purposes of this rule ‘telegraphic transfer buying rate’ shall have the same meaning as assigned to it in Explanation to rule 26.
3. In the said rules, in Appendix-II, after Form No.66, the following Form shall be inserted, namely Form 67
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