Credit on tax paid outside India can now be claimed after ITR filing due date

The Central Board of Direct Taxes has now allowed taxpayers to claim Foreign Tax Credit (FTC) even after the due date of filing Income Tax Return (ITR), which is 31 July every year unless extended by the IT department.

As per the CBDT notification, credit on tax paid outside India can be claimed by submitting Form 67 along with necessary documents after the ITR due date and on or before end of assessment year provided ITR is filed within the original due date or of belated ITR.

"The statement in Form No 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub rule (8) shall be furnished on or before the end of the assessment year relevant to the previous year in which the income referred in the sub-rule (1) has been furnished within the time specified under sub-section (1) or sub-section (4) of section 139,” the CBDT notification said.

“The FTC can now be claimed even when filing an updated return of income provided Form 67 is furnished before filing such return,” said Sachin Garg, Partner- Direct Taxation, Nangia Andersen LLP.

Until now, taxpayers were required to file their FTC claims by the due date of filing ITR.

“This created many challenges for India tax residents who have earned overseas income and incurred foreign taxes on such income as their foreign tax returns were not finalised by then,” said Alok Agrawal, Partner, Deloitte India.

Garg added: “This (amended rule) will certainly augment ease of doing business in India and prevent taxpayers from losing FTC permanently if Form 67 is not filed within the due date of filing return of income.”

The amended rule is retrospectively effective from April 2022. “Taxpayers can now file Form 67 and relevant documents by March 2023 in relation to their tax returns for the financial year 2021-22,” said Agrawal.