Paid tax abroad on US dividends, RSUs, foreign salary, freelance receipts or overseas business income? Don't pay tax twice. We compute your Foreign Tax Credit under Rule 128, e-file Form 67 (Form 44 under the Income-tax Act, 2025), reconcile Schedule FSI & TR, and defend FTC claims denied by CPC — end to end.
End of the assessment year, where ITR is filed u/s 139(1) or 139(4). Best practice: file before or with your ITR.
Sections 159 & 160 of the Income-tax Act, 2025 from Tax Year 2026-27 onwards.
Renumbered under the Income-tax Act, 2025 rules framework for TY 2026-27 onwards.
Foreign tax paid vs Indian tax on the same income — computed source-wise & country-wise.
If you are a resident of India, your worldwide income is taxable in India — even income that has already suffered tax in another country. Foreign Tax Credit (FTC) is the mechanism that lets you offset the foreign tax already paid against your Indian tax liability on the same income, so the same rupee of income is not taxed twice.
A simple example: you hold shares of a US company. When the dividend is paid, the US withholds 25% under the India-US DTAA. India also taxes that dividend at your slab rate. Without a valid FTC claim, you lose the entire US withholding — permanently. Form 67 is the statutory statement prescribed under Rule 128 of the Income-tax Rules, 1962 through which this credit is claimed. No Form 67, no credit — that is how the CPC processes returns in practice.
Where India has a Double Taxation Avoidance Agreement (DTAA) with the foreign country (90+ treaties, including USA, UK, UAE, Singapore, Canada, Australia), relief is claimed as per the treaty — typically by the credit method. Section 90A covers agreements adopted between specified associations.
Where no DTAA exists, India still grants relief unilaterally — a deduction from Indian income-tax at the Indian rate or the foreign rate, whichever is lower, on the doubly-taxed income. Form 67 is required here as well.
From Tax Year 2026-27, double taxation relief moves to Section 159 (agreements with foreign countries) and Section 160 (countries with no agreement) of the Income-tax Act, 2025 — and the FTC statement is renumbered as Form 44.
Dividends from US stocks (25% withholding), foreign mutual funds, ETFs and interest on foreign deposits. Even small dividend amounts need Form 67 — otherwise the withheld tax is a dead loss.
RSU and ESOP income of employees of multinational companies often suffers withholding abroad. FTC on such income needs careful vesting-date, sourcing and TTBR computation.
Worked part of the year abroad but qualify as resident in India? Salary taxed in the host country (US, UK, Kenya, Gulf with taxes, etc.) is again taxable in India — FTC prevents double taxation.
NRIs who return and become resident/ROR face Indian tax on global income — foreign rental income, pensions, capital gains. FTC planning is critical in the transition years, alongside Schedule FA disclosure.
Withholding suffered on fees received from foreign clients (e.g., tax deducted in the client's country) can be claimed as FTC, subject to the DTAA article and Rule 128 conditions.
Indian companies with overseas branch profits, royalties, technical-service fees or dividends taxed abroad — FTC is available even against MAT under section 115JB, computed country-wise and source-wise.
For income up to FY 2025-26 (AY 2026-27), the Income-tax Act, 1961 and Form 67 apply. From Tax Year 2026-27 (1 April 2026 onwards), the Income-tax Act, 2025 takes over. Here is the parallel mapping:
| Provision / Item | IT Act 1961 / Rules 1962 | IT Act 2025 / New Rules | What It Covers |
|---|---|---|---|
| DTAA relief (bilateral) | Section 90 / 90A | Section 159 | Relief where India has a tax treaty with the foreign country or specified territory |
| Unilateral relief (no DTAA) | Section 91 | Section 160 | Deduction at the lower of the Indian or foreign rate of tax on doubly-taxed income |
| FTC mechanism & conditions | Rule 128 (w.e.f. 01-04-2017) | Corresponding rule under the new rules framework (2026) | Eligibility, quantum, currency conversion, documents and timelines for FTC |
| FTC statement | Form 67 | Form 44 (w.e.f. 1 April 2026) | Statement of foreign income and foreign tax paid, filed online on the e-filing portal |
| ITR reporting | Schedule FSI, Schedule TR, Schedule FA | Corresponding schedules continue | Source-wise foreign income, treaty relief summary and foreign-asset disclosure |
| Tax Residency Certificate (India) | Application in Form 10FA → TRC in Form 10FB | Corresponding forms under the new framework | Needed by Indian residents to claim treaty benefits in the foreign country |
As per the draft rules framework released with the Income-tax Act, 2025 transition, FTC claims where the foreign tax paid exceeds ₹1 lakh are reported to require verification by a Chartered Accountant. Documentation discipline that was earlier "good practice" is becoming a formal requirement. We track every CBDT notification on this transition — use our free Section Finder (1961 ↔ 2025) or speak to us before you file.
FTC = the lower of the foreign tax paid/deducted and the Indian tax payable on that same income. Excess foreign tax cannot be refunded, carried forward or set off in India.
The credit is computed separately for each source of income from each country, and then aggregated. You cannot pool a high-tax country's excess against a low-tax country's shortfall.
FTC is allowed in the year in which the corresponding income is offered to tax or assessed in India. If income is taxed in India over multiple years, credit is allowed proportionately.
Foreign tax is converted at the SBI Telegraphic Transfer Buying Rate on the last day of the month immediately preceding the month in which the tax was paid or deducted — not Google rates, not year-end rates.
FTC is available against income-tax, surcharge and cess — but never against interest, fee or penalty payable under the Act.
Companies paying Minimum Alternate Tax under section 115JB can also claim FTC against MAT liability, subject to the prescribed adjustment.
Foreign tax under dispute is not creditable. Once the dispute is settled, claim within six months from the end of the month of settlement, with proof of payment and an undertaking that no refund has been claimed.
Provisions of the DTAA apply to the extent they are more beneficial to the taxpayer. The correct treaty article (dividends, interest, royalties, salary, FTS) determines the creditable rate — a frequent point of error.
Estimate the eligible credit for one source of income from one country, applying the Rule 128 "lower-of-two" cap.
All amounts in ₹ (convert foreign tax at the applicable SBI TTBR)
Indicative estimate for one source-country pair only. Actual FTC depends on the DTAA article, elimination method, TTBR conversion and your final Indian computation. This is not professional advice.
When must the FTC statement be filed for your year and return type?
Based on Rule 128(9) as amended w.r.e.f. 01-04-2022. Late Form 67 claims are routinely denied by CPC — see the case-law section below for remedies.
Tick what you already have. Under Rule 128(8), these must be furnished on or before the Form 67 deadline.
Form 67 can be filed only online through the Income Tax e-filing portal, and must be e-verified.
Use your PAN/user ID and password at incometax.gov.in. Ensure PAN is active and linked with Aadhaar — an inoperative PAN blocks the filing.
Go to e-File → Income Tax Forms → File Income Tax Forms, search "Form 67" (from TY 2026-27, look for "Form 44 — Foreign Tax Credit"), select the correct Assessment Year and click "Let's Get Started".
Basic details, then country-wise and source-wise foreign income, nature of income, foreign tax paid/deducted, DTAA article and rate, and the credit claimed — with TTBR-converted amounts.
Refund of foreign tax arising from carry-backward of current-year losses, and details of any disputed foreign tax (for which credit is claimed only after settlement).
Upload the certificate/statement of foreign tax and proof of payment. Complete the self-declaration, then e-verify using Aadhaar OTP, DSC or EVC. Download the acknowledgement.
Report the foreign income in the relevant head and in Schedule FSI, claim relief in Schedule TR, disclose assets in Schedule FA, and file the ITR. Mismatch between Form 67 and the ITR is the single most common reason CPC denies FTC.
FTC sits at the intersection of the DTAA, Rule 128, ITR schedules and foreign documentation. A wrong treaty article, a net-of-tax figure reported instead of gross, an incorrect TTBR month, or a Schedule TR mismatch — each of these routinely converts a legitimate credit into a section 143(1) demand with interest. Our team handles the computation, the filing and, where needed, the defence.
CPC Bengaluru mechanically denies FTC where Form 67 was not on record before processing, raising demands with interest under sections 234A/234B/234C. But the judicial position strongly favours the taxpayer.
The Madras High Court in Duraiswamy Kumaraswamy v. PCIT (2023) held that filing Form 67 is directory in nature. ITAT benches across Delhi, Mumbai, Bengaluru, Kolkata, Pune and Hyderabad have consistently followed this view — FTC is a vested right under the DTAA read with section 90, and neither the section nor the treaty provides that the credit is lost for a procedural lapse. Treaty provisions override the Act to the extent more beneficial.
| # | Mistake | Consequence | Correct Approach |
|---|---|---|---|
| 1 | Not filing Form 67 at all ("the amount is small") | Entire foreign tax lost; income taxed twice | File Form 67 for every FTC claim, however small |
| 2 | Reporting net-of-tax foreign income | Under-reporting; mismatch with AIS/foreign data; notice risk | Report gross income in Schedule OS/relevant head & Schedule FSI; claim the withheld tax separately |
| 3 | Form 67 filed after the ITR / after processing | CPC denies FTC; demand with 234A/B/C interest | File Form 67 before or along with the ITR |
| 4 | Wrong exchange rate (Google/year-end rate) | Incorrect credit; adjustment on processing | Use SBI TTBR of the last day of the month preceding payment/deduction |
| 5 | Pooling credits across countries or sources | Excess claim disallowed | Compute source-wise and country-wise, then aggregate |
| 6 | Schedule FSI / TR figures not matching Form 67 | FTC denied on reconciliation failure | Three-way reconciliation before filing: Form 67 = FSI = TR |
| 7 | Ignoring Schedule FA while claiming FTC | Black Money Act exposure — penalty per undisclosed asset | Disclose all foreign assets/accounts; see our Foreign Asset guide |
DTAA article analysis, source-wise/country-wise computation, TTBR conversion, MAT interplay and elimination-method review — for individuals, returning NRIs, firms and companies.
Preparation, documentation and e-verification of the FTC statement on the portal — including the Form 44 transition and CA-verification requirements under the Income-tax Act, 2025 framework.
ITR-2/ITR-3 preparation with Schedule FSI, TR and FA fully reconciled, AIS/26AS matching and refund tracking — see ITR Filing services.
Rectification u/s 154, replies to 143(1) intimations and demand notices where FTC has been denied — with judicial precedents on procedural filing.
CIT(A) and ITAT representation on FTC disputes, backed by our tax litigation practice and LLM (NLU Delhi) credentials.
Form 10FA/TRC assistance, Form 145/146 remittance certificates, and NRI & FEMA compliance under one roof.
From a single US-dividend Form 67 to multi-country corporate FTC computations and CPC denial defence — CA Alok Kumar's team (22+ years, 110+ professionals) handles your cross-border tax credit end to end, from Dwarka & Rajendra Place, New Delhi, and remotely Pan-India & worldwide.