Double Taxation Avoidance Agreement (DTAA) is entered between two countries to avoid double taxation, i.e., same income is being taxed in both countries, maintaining mutual economic relations, trade and investments. DTAA are entered in accordance with power granted under Section 90 and 90A of Income tax Act.
As per Section 90 and 90A of Income Tax Act, A non-resident Indian can avoid taxability liability in India on income generated in India by furnishing a Form 10F and Tax Residency Certificate from another country. But what about if a Resident Indian pays Income Tax in another country and is liable to pay income tax on that income in India as well?
In such a situation, a resident Indian is entitled to claim credit for tax paid in foreign country while filing his Income tax return in India in accordance with provisions of Section 90, 90A and 91 of Income Tax act read with Rule 128 of Income Tax Rules. This article contains a detailed discussion of how to claim Foreign Tax Credit while filing ITR.
1. What is Foreign Tax Credit
- Foreign tax Credit is a given when a resident Indian offers the same income to tax in India and as well as another country.
- In that case, he is entitled to claim credit of Income tax paid in another country from his Income tax liability arising in India subject to certain compliances.
- E.g.,
- An Assessee is an Indian Resident and has provided his services to the Singapore Client.
- While remitting funds, The Singapore client deducted TDS on his remittance even though such person is not liable to file ITR in Singapore.
- However, such a person is liable to pay Income Tax on such income in India.
- Therefore, as per DTAA between India and Singapore, Such person shall be entitled to claim deduction of tax withholding deducted in Singapore from his Income Tax liability arising in India subject to conditions given under Income Tax Act.
2. Foreign Tax Credit (“FTC”) under Income Tax Act
- Provisions related to FTC are given under Section 90, 90A and 91 of Income Tax Act read with Rule 128 of Income Tax Rules.
- FTC is claimed under Section 90 where India has entered in to a DTAA with another country. However, FTC for other countries is claimed under Section 91.
- Relief is provided in following 2 manners:
阅读更多： 外国公司获取 PAN 和提交所得税申报表（ITR）的要求
- Relief to Non-residents:
- Non-residents, who are not entitled to pay Income Tax in India can get their income without deduction of any withholding tax in India.
- However, for this purpose a non-resident is required to file Form 10F in India alongwith a Tax residency Certificate.
- Relief to Residents:
- As per Rule 128 of Income Tax Rules, A resident shall be allowed a credit for the amount of any foreign tax paid by him in a country outside India.
- However, for this purpose, Assessee is required to furnish Form 67 alongwith specified certificates and statements.
3. Conditions of Claiming FTC
An Assessee is entitled to claim benefit of FTC subject to fulfillment of following conditions:
- Credit shall be allowed in the year in which Income, on which withholding tax is deducted or tax has been paid in another country, is offered to tax in India.
- However, In case, income is offered to tax in multiple year then credit shall also be allowed across all years on proportionate basis.
- Foreign Tax shall means:
- Countries with which India has entered into a DTAA, tax covered under the agreement;
- With respect to other countries, the tax payable under the law in force in that country
- Such credit can be used against Tax, Surcharges and cess payable under Income Tax Act. No credit shall be allowed against interest, Fee or penalties.
- No Credit shall be allowed for tax under dispute unless assessee furnishes an evidence of settlement of dispute and an evidence that the liability for payment of such foreign tax has been discharged by him.
- FTC shall be allowed for lower of the following amount:
- Tax Payable under Income Tax Act on such foreign income; or
- Foreign tax paid on such foreign income
- In case, Foreign tax paid is in excess of Income Tax payable in India on such income then such excess Foreign Tax shall be ignored and shall not be carried forward to next Assessment year.
- Credit of Foreign Tax shall be allowed on furnishing of following documents:
- Statement of Income earned outside India on which foreign tax is deducted or paid in Form 67;
- A Statement or certificate specifying the nature of Income and amount of tax deducted or paid from:
- Tax Authority of such country; or
- Person responsible for deduction of TDS
- However, if no certificate or statement is available from Tax authority or transferor, Assessee can furnish a self signed statement or certificate. However, same is required to be accompanied with:
- In case of tax payment, an acknowledgement of online payment or bank counterfoil or challan for payment of tax;
- In case of tax deduction, proof of deduction where the tax has been deducted.
4. Information to be furnished in Form 67
Assessee is required to furnish following information in Form 67:
PART-A
- Name, Address and Permanent Accounting Number;
- Head-wise following details of income from a country or specified territory outside India and Foreign Tax Credit claimed:
- Name of the Country/Specified Territory;
- Source of Income, i.e., Salary, House Property, Business/Professional Income, capital Gains, Interest, Dividend, etc.
- Income from Outside India;
- Rate and amount of Tax paid outside India;
- Tax payable on such income under normal provisions in India
- Tax payable on such income under section 115JB/JC
- Credit claimed under section 90/90A
- Article No. of Double Taxation Avoidance Agreements
- Rate of Double Taxation Avoidance Agreements Rate of tax as per Double Taxation Avoidance Agreements
- Amount
- Credit claimed under section 91 Amount
- Total foreign tax credit claimed
延伸阅读： 如何在所得税申报中申请外国税收抵免
B部分
- 是否因亏损结转回溯而在任何以前的会计年度申请过外国税收退税（是/否）
- 若回答为是，需提供以下详细信息：
- 该亏损所属的会计年度
- 进行亏损结转回溯抵销的会计年度
- 该会计年度申请的退税额
- (iii)中所述退税对应的上一年度
- 是否已申请任何处于争议中的外国税收抵免（是/否）
- 若回答为是，需提供以下信息：
5. 67号表格的申报截止日期
- 67号表格连同证明书或声明应在相关评估年度结束前提交，前提是该评估年度的纳税申报表已在相关评估年度的12月31日前提交。
- 然而，如果纳税人提交的是ITR-U（即更新后的申报表），则67号表格连同证明书或声明应在此类申报表提交日期之前提交。
6. 67号表格的申报流程
- 67号表格可在所得税门户网站在线提交。
- 纳税人需使用其用户ID和密码登录所得税电子申报门户网站。
- 登录后，可按以下路径找到67号表格：
电子申报 (e-file) > 所得税表格 (Income Tax Forms) > 提交所得税表格 (File Income tax forms) > “其他（收入来源不相关）” (Others (sources of Income not relevant)) > 杂项67号表格 (Miscellaneous Form 67)
- 67号表格可以使用纳税人的数字签名证书 (DSC) 或通过电子验证码进行提交。
