A Guide: When and How Should NRIs File Form 67 for Foreign Tax Credits?

The Indian Income Tax Act has provisions for NRIs to help them avoid double taxation and receive tax relief when foreign taxes are already paid on the same income. Continue reading this blog to understand when and how to file Form 67 to claim FTC.

The Indian Income Tax Act has provisions for NRIs to help them avoid double taxation and receive tax relief when foreign taxes are already paid on the same income. Continue reading this blog to understand when and how to file Form 67 to claim FTC.

What is Foreign Tax Credit (FTC)?

Foreign Tax Credit refers to the mechanism by which Indian taxpayers can reduce their tax liability in India for the tax paid on their foreign income earned abroad, which is also taxable in India. The objective of this mechanism is to help citizens avoid paying tax twice on the same income—once in the foreign country where the income is earned, and again in India.

According to Rule 128 of the Income Tax Rules, 1962, taxpayers can claim FTC if India has signed a Double Taxation Avoidance Agreement (DTAA) with that country for foreign taxes. To claim a Foreign Tax Credit, taxpayers need to accurately report income from cross border transactions and taxes paid in a foreign country in their Indian tax returns.

Recommended: Income Tax for NRI in India: Everything You Need to Know

What is Form 67 of the Income Tax Act?

Form 67 is a mandatory form that must be submitted when filing your income tax returns under Section 139(1) to claim a foreign tax credit in India. This form includes:

• Details of foreign income earned
• Amount of foreign tax paid
• Tax residency certificate (TRC) and other documents

As per Sections 90 and 91 of the Income Tax Act, if you are eligible for FTC, then Form 67 must be filed if you want to receive the benefits. 

Who Needs to File Form 67?

You need to file Form 67 if:

• You are an NRI and have income from a foreign source
• You have already paid tax in a foreign country on that income
• The same income is taxable in India
• You want to claim credit for foreign taxes paid

If tax is deducted (TDS) from the source in a foreign country on a foreign income, you are still eligible for FTC if you show a certificate from the foreign employer that mentions the tax deducted or paid at source. To receive professional guidance on FEMA Compliance and other complex taxation laws and regulations in India, reach out to our tax consultants today.

Read Also: Disclosures and Penalties of Foreign Assets in Income Tax Return

Foreign Tax Credit and Form 67

To claim the FTC, Form 67 must be submitted online through the official income tax portal. If this is not done, the credit for foreign tax payment may be denied, increasing your tax burden in India.

The credit is limited to the amount of Indian tax payable on the same income. For example, if you paid $100 in the U.S. as tax on interest income, and Indian tax on that same income is ₹6,000, the credit will be allowed up to ₹6,000, even if $100 equals more.

The process is governed by Rule 128 of the Income Tax Rules, and not following it properly can result in the disallowance of the tax credits.

Documents Required To Claim FTC

To file Form 67 and claim FTC, the following documents are generally required:

• Tax Residency Certificate (TRC) from the foreign country's authority
• Proof of foreign tax paid (from foreign employer)
• Details of the foreign income earned
• Any supporting documents or other certificates from foreign tax authorities

Make sure these documents are ready before you submit Form 67 when you file your income tax returns in India.

When and how should NRIs file Form 67 for Foreign Tax Credits?

Filing Form 67 is mandatory to claim the FTC in India. Make sure to reach out to the top Chartered Accountant Firms in Gurgaon for professional guidance in the process. 

When Should NRIs File Form 67 for Foreign Tax Credits?

As per Indian tax laws, Form 67 can be filed on or before the current assessment year. You need to file the form before 31st December. Late filing of Form 67 will lead to a loss of tax credits, where you may need to face double taxation. So, it's advisable to file Form 67 and compute your tax liabilities as soon as possible.

How to File Form 67 Online?

Follow these steps to file Form 67 online:

• Log in to the e-Filing portal (https://www.incometax.gov.in).
• Go to ‘e-File’ → ‘Income Tax Forms’ → ‘File Income Tax Forms’.
• Select "persons not dependent on any source of income" and then select "Double Taxation Relief" (File 67) from the next subpage. Click on the "File Now" option.
• Select the correct "Assessment Year" and click on the "Continue" button.
• Click on the "Let's Get Started" button on the instructions page.

Fill in:

• Details of foreign income
• Amount of foreign tax paid
• Details of the foreign country, source of income, and tax deducted at source.
• Upload the necessary documents (TRC, tax receipts, etc.)
• Submit and verify the details.

After you submit the details, an e-verification page will appear. It will show the acknowledgement number and transaction ID. Take note of the acknowledgement number for future purposes.

Read More: Residential Status and Its Impact on Taxability in India

Final Thoughts

For NRIs, claiming foreign tax credit for foreign income earned abroad and filing returns for the tax in India can feel overwhelming. While Form 67 helps to reduce the tax burden, the process can feel complicated. Filing your taxes on time and accurately ensures that you are not taxed twice on the same income.