International Tax Advisory

FOREIGN TAX CREDIT (FTC) — FORM 67

Sections 90 / 90A / 91 of the Income Tax Act, 1961 allow credit for taxes paid in foreign countries. Rule 128 of the Income Tax Rules, 1962 governs the claim of Foreign Tax Credit (FTC).

Form 67 must be filed to claim FTC — it is a statement of foreign income offered to tax and foreign tax deducted or paid.

Critical deadline: Form 67 must be filed on or before the due date of filing the ITR under Section 139(1) — i.e. 31 July for non-audit assessees, 31 October for audit assessees. After this date, the FTC claim is permanently disallowed (Rule 128(9)).

CBDT Circular No. 9/2017 clarified that FTC cannot be carried forward.

Documents required: Tax Residency Certificate (TRC), tax payment proof from the foreign country (Form W-2 in the US, P60 in the UK, etc.), and the foreign tax assessment order.

Where a DTAA applies: credit is limited to the lower of Indian tax on the foreign income or the foreign tax paid. Where no DTAA applies (Section 91): credit is the lower of foreign tax paid or the Indian rate on such income.

Note: If foreign tax is refunded later, the credit already claimed must be reversed.

International tax advisory covers the taxation of cross-border income and transactions under the Income-tax Act 1961 and the tax treaties India has signed. The core of the advisory is the residence and the source rules, the taxation of the non-residents under Sections 5 and 9, the transfer pricing provisions of Sections 92 to 92F for the international transactions between the associated enterprises, the withholding on the payments to the non-residents under Section 195, the treaty benefits and the limitation of benefits, and the dispute resolution under the mutual agreement procedure and the advance pricing agreements.

The international tax position is where the Indian tax and the foreign tax meet. A payment from an Indian company to a foreign affiliate carries the withholding under Section 195, the transfer pricing on the transaction itself, and the treaty question of where the income is taxed. The same transaction is read by the Indian tax department, the foreign tax department and the treaty together — and each reads it differently until the position is documented.

The cost of an unmanaged international position is the double taxation and the adjustment: the withholding that was not done and the disallowance under Section 40(a)(i), the transfer pricing adjustment under Section 92C with the interest, and the treaty relief that was never claimed because the documentation was never built. Each is a cross-border leak that is expensive to close after the fact.

This service is for companies with cross-border income, payments and structures. We map the international transactions and the positions under the Act, handle the transfer pricing compliance and the documentation under Sections 92 to 92F, manage the withholding under Section 195 and the treaty benefits, structure the cross-border payments and the repatriation, and support the assessments and the dispute resolution.