Foreign tax credit in India: Form 67, Form 44 and worked examples

Which foreign tax can be credited in India?

When India taxes income on which a taxpayer has paid qualifying foreign income tax, foreign tax credit (FTC) can reduce the Indian tax on that income. Start with the taxpayer’s Indian residential status and which income is actually taxable in India. An ordinary resident is generally taxed on worldwide income. A resident but not ordinarily resident can be eligible for FTC where the foreign income is within the narrower Indian tax base and all other conditions hold. The residence condition excludes a non-resident from the general domestic FTC rule.

Period	Treaty and unilateral relief	Credit form
Income through FY 2025–26 (including AY 2026–27)	Income-tax Act, 1961, Sections 90 and 90A (treaty or specified agreement), and 91 (unilateral relief); Income-tax Rules, 1962, Rule 128	Form 67
Tax year 2026–27 onward	Income-tax Act, 2025, Sections 159 and 160; Income-tax Rules, 2026, Rule 76	Form 44, and Form 45 for notification of settlement of disputed foreign tax where applicable

Use the applicable treaty, including its covered taxes, allocation of taxing rights, relief article and any effective protocol. Sections 91 and 160 have their own conditions and rate definitions. Foreign withholding by itself does not establish that the source country could charge that amount under the treaty. In particular, US federal income tax and a US state levy require separate analysis. California tax is outside the India–US convention’s list of US taxes covered; do not assume that it is separately creditable or deductible. Check the statutory basis and relevant authority for the facts. A salaried employee cannot claim a business-expense deduction merely because the deduction has been argued in corporate tax litigation.

Compute the credit separately for each source and country

1. Identify income taxed in both countries, and the year or years in which India taxes it. If the same income is offered across multiple Indian years, allocate the associated foreign tax in the same proportion.
2. Convert the foreign tax at the SBI telegraphic transfer buying rate on the last day of the month before payment or deduction (Rule 128(5)(ii) for older years). Apply the separate conversion or valuation provisions for the income, including relevant salary and equity valuation rules. The rates for income and tax may differ.
3. For each source from each country or specified territory, compare Indian tax payable on that income with eligible foreign tax paid. Ignore foreign tax exceeding what the treaty permits. Add the individual allowed credits; excess on one stream cannot offset Indian tax on another. The rules do not provide a separate refund or carry-forward of unused FTC.
4. FTC can offset Indian income tax, surcharge and cess, as applicable; it cannot offset interest, fee or penalty. Exclude disputed foreign tax initially. Under Rule 128(4), a later credit for the original year can be available if, within six months from the end of the month of settlement, the taxpayer furnishes settlement and payment evidence and an undertaking that no refund has been or will be claimed. Section 155(14A) addresses amendment after resolution of disputed foreign tax, subject to its conditions. For tax years under the 2025 Act use Form 45 with the same six-month period under Rule 76(6) and (15).
5. For years under the 1961 Act, Rule 128(6) permits FTC against MAT (Section 115JB) or AMT (Section 115JC) in the same manner as under the normal provisions. Under Rule 128(7) the excess of FTC available against MAT/AMT over FTC available under the normal provisions is ignored in computing the carry-forward MAT/AMT credit under Section 115JAA or 115JD. Compute both sets of figures separately.

Filing deadline and evidence

Form 67: The older Rule 128(9) tied filing to the Section 139(1) return due date. Notification 100/2022 substituted the end of the relevant assessment year, with effect from 1 April 2022, if the return is filed within the time under Section 139(1) or 139(4). For example, for FY 2023–24/AY 2024–25 that form deadline was 31 March 2025 if the return met the applicable filing condition. It did not extend the deadline for the return itself. For income included in an eligible updated return under Section 139(8A), file the relevant form and evidence by the date the updated return is furnished. A tribunal’s decision on older facts is not a general extension or a guarantee that a delayed filing will be accepted.

Form 44: The 2026 rules require the statement and evidence within 12 months from the end of the relevant tax year where the return was filed in time under Section 263(1) or (4). For tax year 2026–27 this normally means by 31 March 2028. For income included in an eligible updated return under Section 263(6)(a), file by the date that return is furnished. An accountant must verify Form 44 for companies, and for other taxpayers if foreign tax paid outside India for the tax year is ₹1 lakh or more. Form 45 also requires accountant verification if Form 44 for that year required it.

Obtain a certificate or statement that identifies the income and tax deducted or paid, from the foreign tax authority or the deductor. The rules also allow a statement signed by the taxpayer supported by evidence such as a payment acknowledgement, bank counterfoil or challan, or proof of deduction as applicable. Retain the tax and income calculations, applicable exchange rates and returns. An unexplained difference between a gross invoice and the bank receipt is not evidence of foreign income tax.

Four worked illustrations

1. Salary and US RSUs: separate federal and state taxes

In FY 2023–24 (AY 2024–25), Rohan is resident and ordinarily resident in India. Assume ₹35 lakh of Indian gross salary and a USD 60,000 taxable RSU employment benefit (₹49.80 lakh), attributable to earlier US duties for which US federal tax is properly payable under the treaty. The illustrative conversion rate is ₹83 per USD for both the benefit and tax; confirm the applicable rules and rates in an actual filing. Assume no other income or deductions except the single ₹50,000 standard deduction and no special rates. Do not infer a US treaty entitlement solely from the employer’s location or a W-2.

Item	Calculation
Global gross salary; taxable salary	₹84,80,000; ₹84,30,000 after the standard deduction
Indian tax under AY 2024–25 new regime	₹22,29,000 basic income tax + ₹2,22,900 surcharge (10%) + ₹98,076 cess (4%) = ₹25,49,976 before final rounding
Illustrative Indian tax attributable to RSUs	Prorate the deduction across gross salary components: net foreign component about ₹49,50,637. Multiply by the unrounded effective rate (about 30.25%): about ₹14,97,509.
Federal and California amounts paid	Federal USD 13,200 (22%) = ₹10,95,600; California USD 4,800 (8%) = ₹3,98,400; total USD 18,000 = ₹14,94,000.
Eligible FTC and Indian balance	Federal credit ₹10,95,600, the lower amount, assuming the federal tax is fully treaty eligible. No California credit assumed. Indian balance ₹14,54,376 before rounding, or ₹14,54,380 under Section 288B before other payments or credits.

The proportional attribution is an illustration for two components of ordinary salary. Where the income attracts different rates or deductions, compute attributable Indian tax on the facts.

2. Japanese royalty and minimum alternate tax

Assume an Indian domestic company with ordinary MAT at 15% (and without an exemption from MAT) has ₹12 crore book profit in FY 2023–24, including ₹3 crore book profit from royalty income. With 12% surcharge and 4% cess, MAT is 17.472% of book profit, or ₹2,09,66,400. Assume Article 12 permits Japan to tax the entire ₹3 crore royalty base at 10% and the qualifying Japanese tax paid is ₹30 lakh.

On the assumed proportionate allocation, the Japanese book profit is 25% of total book profit and its share of MAT is ₹52,41,600. The ₹30 lakh FTC reduces MAT to ₹1,79,66,400. That is the cash liability under this MAT calculation before other payments. It does not establish the final tax payable or the carry-forward credit without the normal-tax computation and the adjustment under Rule 128(7).

3. German and Singapore dividends: apply the treaty ceiling

Kavita receives a ₹10 lakh German dividend with ₹2,63,750 deducted at 26.375%, and a ₹15 lakh Singapore dividend on which no foreign tax is charged. Assume Kavita is an eligible Indian treaty resident and beneficial owner, that the applicable Germany treaty ceiling under Article 10 is 10% of the gross dividend, and that the attributable Indian tax rate on each stream is 20% for illustration.

Item	Germany	Singapore
Gross income	₹10,00,000	₹15,00,000
Indian tax attributable	₹2,00,000	₹3,00,000
Qualifying foreign tax and FTC	₹1,00,000 treaty limit; FTC ₹1,00,000	Nil; FTC nil
Indian tax remaining	₹1,00,000	₹3,00,000

The ₹1,63,750 German withholding above the treaty limit cannot be credited in India. Check whether it can be recovered through the German relief or refund process. It cannot offset tax on Singapore income.

4. Unilateral credit on consulting income

Assume Horizon Mining Consultants LLP earns ₹80 lakh from an overseas project in the Republic of the Congo during a year governed by the 1961 Act, and no applicable double-tax agreement covers the income. The customer withholds ₹12 lakh (15% of gross fees). For this illustration, assume that ₹80 lakh is also the relevant assessed foreign income after applicable relief under foreign law and the doubly taxed income under Section 91, the LLP’s Indian rate under the statutory definition is 31.2% (30% tax plus 4% cess, with no surcharge), and all source and proof conditions are met. Section 91 gives relief at the lower rate, 15%: ₹12 lakh. On these assumptions Indian tax on that income before credit is ₹24.96 lakh, leaving ₹12.96 lakh. If deductible project costs change either tax base, recompute the rates and eligible amount; do not simply apply the withholding percentage to gross receipts.

Practical filing checklist

1. For older years sign in to the Income Tax e-Filing portal, open e-File → Income Tax Forms → File Income Tax Forms, select Form 67 and the relevant assessment year. For the new Act use the form and tax year specified for that return.
2. Enter country, source, income, tax paid or deducted and the credit computed under the applicable rule. Report disputes and refunds where required. Upload supporting evidence and e-verify using the option applicable to the taxpayer; retain the acknowledgement.
3. Reconcile the claim with the relevant return schedules (including FSI and TR in the applicable older ITR) and the supporting worksheet. Check the foreign asset disclosure requirement separately, including Schedule FA if applicable.
4. Maintain proof for the relevant assessment, reassessment and litigation periods. Confirm foreign treaty claims, withholding rates, Indian tax allocation and filing deadlines before relying on the credit.

Frequently asked questions

1. Can I file Form 67 after the Section 139(1) due date?

The amended rule allows the later form deadline described above if the return meets Section 139(1) or (4). Save the return and form acknowledgements. Filing within time does not guarantee automatic processing of the claim.

2. Does an Indian parent get credit for tax its overseas subsidiary paid?

Do not include the subsidiary’s own corporate tax by default. Check for a specific underlying-credit provision and its conditions in the relevant treaty; distinguish it from withholding on income paid to the parent.

3. What if the foreign and Indian tax years differ?

Reconcile income by Indian period. Rule 128(1) and the corresponding 2026 rules allocate qualifying foreign tax across Indian years in proportion to the income offered in each, where applicable.

4. What if the foreign country refunds tax after I claimed credit?

Reconcile the refund with the original credit and correct the Indian claim through the applicable procedure. Under the old rules Rule 128(10) requires Form 67 for refunds resulting from foreign loss carry-back; Section 155(14A) concerns credit previously denied because the tax was disputed. The 2026 rules expressly require Form 44 in a wider set of foreign refund cases.

5. Can credit offset Indian surcharge and cess?

Yes, the rules include income tax, surcharge and cess, where applicable, and exclude interest, fee and penalty.

6. Are payment platform fees proof of tax?

No. Distinguish processing fees and currency charges from statutory foreign income-tax withholding. Obtain the evidence specified in the rules, including proof of deduction if relying on a self-signed statement for withheld tax.

Sources

• Income-tax Rules, 1962, Rule 128
• CBDT Notification 100/2022: amended Form 67 timing
• Income-tax Act, 1961, Section 91: unilateral relief
• Income-tax Act, 2025 as amended: Sections 159, 160, 206 and 288
• Notified Income-tax Rules, 2026: foreign tax credit, Forms 44 and 45
• Income Tax e-Filing: Form 67 workflow (use the rule for the deadline)
• CBDT Circular 1/2024: FY 2023–24 salary tax and new-regime computation
• India–United States tax convention: Articles 2, 16 and 25
• Japan Ministry of Finance: India–Japan convention and protocol, Article 12
• Germany Federal Gazette: India–Germany tax agreement, Article 10
• Income Tax Department guidance on Forms 44 and 45