Key Highlights
- FTC under Section 213, ITA 2025 (corresponds to Section 90/91 of ITA 1961)
- Applicable when India has a DTAA with the country (Section 213) or not (Section 213A — unilateral relief)
- FTC = Tax paid in foreign country (converted to INR) — subject to Indian tax on that income
- Excess foreign tax NOT refunded — only offset against Indian tax
- Form 67 must be filed on IT Portal BEFORE the due date of ITR — essential condition
- FTC limited to Indian tax on that income — cannot exceed Indian liability
- TDS/withholding tax deducted abroad qualifies as FTC
1. When Does Double Taxation Arise?
Double taxation arises for Indian residents who receive income from foreign sources — such as:
- Salary or professional fees from a foreign employer
- Dividend from foreign shares
- Interest from foreign bank accounts
- Capital gains on sale of foreign assets
- Royalties from foreign licensees
The foreign country deducts withholding tax at source. India taxes the same income as part of the resident global income. Without FTC, the taxpayer pays tax twice on the same income.
2. How FTC Works
FTC allows the Indian resident to offset the foreign tax paid against the Indian tax liability on the same income:
- FTC eligible = Foreign tax paid (converted at RBI rate on the date of tax payment)
- Indian tax on that income = Indian tax liability attributable to the foreign income
- FTC allowed = Lower of (FTC eligible) or (Indian tax on that income)
- Excess foreign tax (where foreign rate exceeds Indian rate) is NOT refunded or carried forward
3. FTC Computation Example
Illustrative only. Priya, Indian resident, receives salary from a US assignment. US withheld USD 10,000 (Rs 8.3 lakh at exchange rate). Indian tax on US salary income = Rs 6 lakh.
- Foreign tax paid (INR) = Rs 8,30,000
- Indian tax on US salary = Rs 6,00,000
- FTC allowed = lower of Rs 8.3L or Rs 6L = Rs 6 lakh
- Excess Rs 2.3L foreign tax: not refunded, not carried forward
- Net Indian tax payable = Rs 0 (full Indian tax on US income eliminated)
4. Form 67: MANDATORY Before ITR Due Date
To claim FTC, Form 67 must be filed on the Income Tax Portal BEFORE the due date for filing the ITR (31 July for non-audit cases; 31 October for audit cases). This is a mandatory procedural requirement — failure to file Form 67 in time results in denial of FTC, even if foreign tax was genuinely paid.
Form 67 requires: country-wise details of foreign income; foreign tax paid; exchange rate; and Indian tax on that income. Tax payment certificates or TRC from the foreign country should be retained as supporting documents.
5. Unilateral Relief (Section 213A): Non-DTAA Countries
If India does not have a DTAA with the foreign country, unilateral relief is available under Section 213A of ITA 2025. The relief is limited to the lower of: foreign tax paid; or Indian tax on that foreign income. The procedure is the same — Form 67 before ITR due date.
6. Why TaxClue
Foreign tax credit involves exchange rate computation, Form 67 filing, and income-wise tax attribution. Missing the Form 67 deadline can cost lakhs in denied credits. TaxClue handles all FTC claims and international tax ITR filing. Contact us for foreign tax credit advisory under ITA 2025.