How to Claim Credit of Foreign Tax Paid in Income Tax Return in India I CA Satbir Singh
Credit of Taxes paid Outside India /Foreign Tax Credit
If a person had paid taxes in a foreign country while doing project work for 4 months. How can he claim credit for the same in Income Tax Return /ITR in India ?
If Resident Assessee has paid tax in any foreign country or specified territory outside India, he shall be allowed a credit for the same, by way of deduction or otherwise.
The credit shall be allowed in the year in which the assessee offered such income to tax or assessed to tax in India.
Income-tax Rules lays down broad principles and conditions for computation and claim of foreign taxes paid in overseas countries by the resident taxpayers.
Foreign Tax Credit
The credit under 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.
File Form No 67 to claim Credit of Foreign Tax Paid
A statement of foreign income offered to tax and the foreign tax deducted or paid on such income is required to be submitted in Form No. 67.
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.
Needs Certificate or statement to Claim Credit of Foreign Tax Paid
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 acknowledgement 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. |
The certificate or statement specifying the nature of income and foreign tax deducted or paid are required to be furnished on or before the due date for filing of ITR.
Calim of Disputed Foreign Tax
No credit shall be available in respect of any amount of foreign tax or part thereof which is disputed in any manner by the assessee:
However 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.
Efiling Portal to claim Credit of Foreign Tax Paid
The form is required to be furnished electronically through the e-filing portal of the Income-tax department.
Relevant Schedule in ITR to claim Credit of Foreign Tax Paid
Further, the details of tax relief claimed for taxes paid outside India are required to be reported in ‘Schedule TR’ of ITR form.