In this article
You have paid tax on income outside India. If India also taxes that income, you may be entitled to claim foreign tax credit (FTC) against your Indian income-tax liability.
But foreign tax deducted is not automatically foreign tax credit allowable in India. The corresponding income must be offered to tax or assessed to tax in India, the foreign tax must qualify under the applicable law and treaty, and the prescribed reporting and documentary conditions must be satisfied.
For FY 2025-26, the ordinary framework uses the Income-tax Act, 1961, Rule 128 and Form 67. From tax year 2026-27, the Income-tax Act, 2025, Rule 76 and Form 44 apply. Form 45 deals with specified cases where a foreign-tax dispute is subsequently settled.
The foreign tax statement shows what was deducted or paid abroad. It does not establish how much India must allow as credit.
Who can claim foreign tax credit in India?
Under the ordinary FTC rules, a resident assessee may claim credit for qualifying foreign tax on income that is offered to tax or assessed to tax in India.
The relevant provisions depend on the period:
- FY 2025-26 and applicable earlier periods: Sections 90, 90A and 91 of the Income-tax Act, 1961, read with Rule 128 of the Income-tax Rules, 1962.
- Tax year 2026-27 onwards: Sections 159 and 160 of the Income-tax Act, 2025, read with Rule 76 of the Income-tax Rules, 2026.
Three separate questions determine the ordinary claim.
1. What is your Indian income-tax residential status?
An individual may be classified as non-resident (NR), resident but not ordinarily resident (RNOR), or resident and ordinarily resident (ROR).
This classification affects the scope of income chargeable to Indian tax.
A returning Indian who qualifies as RNOR is not automatically taxable in India on every item of income accruing abroad. The statutory conditions concerning income received in India, income accruing or deemed to accrue in India, and specified foreign income connected with a business controlled in or profession set up in India remain relevant.
Therefore, a return to India does not automatically create an FTC claim for every overseas income statement.
2. Is the corresponding foreign income taxable in India?
Consider four types of income:
- Salary earned while working outside India.
- Dividends received from foreign shares.
- Rental income from an overseas property.
- Capital gains arising from foreign investments.
Their Indian tax treatment can differ because of residence, source, receipt, income character, timing and applicable treaty provisions.
The FTC enquiry begins with the income actually chargeable in India.
Foreign tax paid on income outside the Indian tax base does not automatically become a credit against unrelated Indian income.
3. Does the foreign tax qualify for relief?
In a country with an applicable DTAA, the tax eligible for credit must be examined under the treaty and relevant domestic rules.
Where there is no applicable agreement, unilateral relief may be available under section 91 of the 1961 Act or section 160 of the 2025 Act, subject to their conditions.
A treaty does not automatically eliminate Indian tax or make all foreign withholding creditable.
The amount legally permissible under the treaty matters.
An exceptional statutory qualification: Section 160(2) of the Income-tax Act, 2025 also provides narrowly defined unilateral relief involving a non-resident assessed on a share of income in a registered firm assessed as resident in India, where the statutory conditions are met. This is distinct from the ordinary resident-assessee Form 44 mechanism.
How is foreign tax credit calculated in India?
Under the ordinary FTC framework, credit is computed separately for each source of income arising from a particular country or specified territory.
The credit is generally the lower of:
- Indian tax payable on the corresponding income.
- Qualifying foreign tax paid on that income.
Where foreign tax exceeds the amount permitted under an applicable DTAA, the excess is excluded from the FTC calculation.
The resulting source-wise credits are aggregated under the applicable rule.
This means that tax deducted overseas, Indian tax on the corresponding income and FTC allowable may be three different figures.
Example: A foreign dividend of ₹1 lakh
Assume an Indian resident taxpayer has the following income and tax figures, all correctly converted into INR.
| Particulars | Amount |
|---|---|
| Foreign dividend taxable in India | ₹1,00,000 |
| Qualifying foreign tax paid | ₹15,000 |
| Indian tax attributable to the dividend | ₹10,000 |
| Allowable foreign tax credit | ₹10,000 |
| Foreign tax not absorbed as Indian FTC | ₹5,000 |
The illustration assumes that the relevant treaty permits the foreign tax of ₹15,000, that the taxpayer satisfies the eligibility requirements, and that the tax has not been disputed or refunded.
India does not allow ₹15,000 merely because the foreign payer deducted that amount.
Under the stated assumptions, the allowable credit is ₹10,000 because that is the lower amount.
The remaining ₹5,000 is not automatically refundable by India. Whether it can be recovered from the foreign country requires examination under that country’s law and applicable treaty procedures.
This is an illustrative calculation, not a conclusion about any particular taxpayer or country’s actual withholding rate.
What if you have income from two countries?
Suppose an Indian resident receives dividends from the United States and rental income from the United Kingdom.
The foreign taxes cannot simply be pooled and compared with the taxpayer’s total Indian liability.
The computation must identify the relevant country, income source, corresponding Indian tax and qualifying foreign tax.
Separate source-wise amounts are calculated and then aggregated under the applicable rule.
Where the same foreign income is offered or assessed to Indian tax across more than one year, Rule 76(2) provides for proportionate allocation of the corresponding foreign tax credit across those years.
Can FTC reduce surcharge, cess, interest or penalties?
Rule 76(4) permits eligible FTC against income-tax, surcharge and cess payable under the Income-tax Act.
It does not permit credit against interest, fees or penalties.
Cases involving minimum alternate tax or alternate minimum tax under section 206 of the Income-tax Act, 2025 require the additional provisions of Rule 76 to be considered. The ordinary numerical illustration above is not a substitute for that separate computation.
What are Schedule FSI, Schedule TR and Schedule FA?
These three schedules serve different purposes.
Under the ITR framework applicable to AY 2026-27, which relates to FY 2025-26, the distinction is as follows.
| Schedule | Purpose | Important distinction |
|---|---|---|
| Schedule FSI | Records relevant foreign-source income and associated foreign-tax details | Foreign income must also be included in the appropriate Indian income-head computation |
| Schedule TR | Summarises country-wise double taxation relief claimed | The relief must reconcile with the FTC calculation and Schedule FSI |
| Schedule FA | Reports specified foreign assets, accounts and other reportable foreign interests | Asset disclosure is not the same as claiming FTC |
The exact return schedules under the Income-tax Act, 2025 must be read from the ITR and instructions prescribed for that tax year. The old Act’s form fields should not be copied mechanically into a return governed by the new Act.
Schedule FSI: Foreign Source Income
Schedule FSI records relevant income from sources outside India that is included in the Indian tax computation, together with foreign-tax particulars.
For example, if a foreign dividend is taxable in India, it must be included under the appropriate income head, ordinarily Income from Other Sources.
The Schedule FSI entry should then reconcile with the Indian income computation and foreign-tax evidence.
Foreign gross income, net bank receipt, income reported abroad and Indian taxable income need not always be identical.
A difference may arise because of the applicable tax treatment or the relevant method of computation and currency conversion.
Those differences must be reconciled, not ignored.
Schedule TR: Tax Relief
Schedule TR summarises the tax relief claimed in India for foreign taxes, generally country-wise.
Under the 1961 Act ITR framework, the relief corresponds to sections 90, 90A or 91, as applicable.
Schedule TR does not make every foreign tax amount eligible for credit.
The figures must be supported by the appropriate FTC calculation and the prescribed filing requirements.
For returns under the 2025 Act, the relevant relief provisions are principally sections 159 and 160. The exact reporting fields must follow the return prescribed for that tax year.
Schedule FA: Foreign Assets
Schedule FA concerns specified disclosures of foreign assets, accounts, financial interests and related matters.
It is separate from the FTC claim.
You may have a reportable overseas account even where it produces no taxable income during the year.
Conversely, foreign-source income may require analysis for Indian taxation and FTC even though the disclosure questions are different.
For AY 2026-27, the Income Tax Department’s ITR-2 instructions state that Schedule FA need not be filled by an individual who is NR or RNOR. The corresponding requirement must be checked against the applicable ITR and residential status for each year.
Taxability, foreign-asset reporting and foreign tax credit must be examined separately.
Form 67 versus Form 44: Which applies?
The relevant income period determines the statutory framework.
| Particulars | FY 2025-26 / AY 2026-27 | Tax year 2026-27 |
|---|---|---|
| Income-tax Act | 1961 | 2025 |
| Relevant relief provisions | Sections 90, 90A and 91 | Sections 159 and 160 |
| Ordinary FTC rule | Rule 128 | Rule 76 |
| Prescribed FTC statement | Form 67 | Form 44 |
| Ordinary document-filing period | End of the relevant assessment year, subject to Rule 128(9) | Within 12 months from the end of the tax year, subject to Rule 76(12) |
| Updated return documentation | Special condition under Rule 128(9) | Special condition under Rule 76(13) |
| General ₹1 lakh accountant-verification threshold | No corresponding requirement under Rule 128 | Applies under Rule 76(16) |
Section 536 of the Income-tax Act, 2025 governs repeal, savings and the transition between the legislative frameworks.
Filing a return after 1 April 2026 does not, by itself, convert an earlier assessment-year FTC claim into a Form 44 claim.
What is the deadline for Form 67?
For the relevant periods, amended Rule 128(9) provides that Form 67 and the supporting certificate or statement must be furnished on or before the end of the relevant assessment year, subject to the corresponding return having been furnished within the time specified under section 139(1) or section 139(4).
For FY 2025-26, the corresponding assessment year ends on 31 March 2027.
Where a return is furnished under section 139(8A), the prescribed documents relating to income included in that updated return must be furnished on or before the date of filing that return.
Notification No. 100/2022, dated 18 August 2022, substituted Rule 128(9) with effect from 1 April 2022.
Some older Income Tax Department portal manuals continue to describe the former deadline linked to the original return due date. The amended rule and the Department’s subsequent guidance on FTC should be followed for the applicable period.
What is the deadline for Form 44?
Rule 76(12) of the Income-tax Rules, 2026 prescribes furnishing Form 44 and the required certificate or statement within 12 months from the end of the relevant tax year, subject to the corresponding return having been filed within the periods specified under section 263(1) or section 263(4).
Where income is included in an updated return under section 263(6)(a), Rule 76(13) requires the corresponding Form 44 documents to be furnished on or before the filing date of that updated return.
These are conditional filing provisions. The 12-month period is not an unconditional extension for every taxpayer or every return.
The provisions governing updated returns must also be satisfied independently.
Does Form 44 require verification by a Chartered Accountant?
Rule 76(16) requires verification by an accountant, as defined under section 515(3)(b) of the Income-tax Act, 2025, in the following cases:
- The assessee is a company.
- The assessee is not a company, but the foreign tax paid outside India for the relevant tax year equals or exceeds ₹1,00,000.
The statutory threshold concerns foreign tax paid outside India for the tax year, rather than only the FTC finally claimed.
Consider an individual with qualifying foreign tax payments of ₹1,20,000 whose Indian FTC computation results in an allowable claim of ₹80,000.
The smaller FTC claim does not, by itself, take the taxpayer outside the verification requirement. The relevant statutory foreign-tax-paid amount must be considered.
The accountant-verification requirement is separate from the certificates and statements supporting foreign income and tax payment under Rule 76(10) and (11).
An accountant’s verification of Form 44 is not interchangeable with a foreign payer’s withholding statement.
How do you file a foreign tax credit claim?
The ordinary filing procedure follows seven steps.
Step 1: Identify the tax year and applicable law.
Confirm the relevant period, Indian residential status and the return form applicable to the taxpayer.
Step 2: Compute the income taxable in India.
Determine the income head, taxable amount and year of chargeability under Indian law.
The foreign tax return or brokerage statement may not reflect the amount chargeable in India.
Step 3: Establish the qualifying foreign tax.
Collect withholding certificates, foreign tax assessments, payment confirmations and other appropriate records.
Identify taxes under dispute, refunded amounts and foreign withholding that may exceed the applicable treaty limit.
Step 4: Calculate the allowable FTC.
Compute the credit source-wise and country-wise, subject to the Indian tax limitation and any applicable treaty ceiling.
Under Rule 76(7)(b), foreign tax is converted into INR using the prescribed telegraphic transfer buying rate on the last day of the month immediately preceding the month in which that tax was paid or deducted.
The conversion of the underlying income is a separate computation question.
Step 5: Complete the Indian ITR.
Include the foreign income under the applicable income head.
For AY 2026-27 returns under the earlier framework, complete Schedule FSI and Schedule TR where applicable, and deal separately with Schedule FA obligations.
For the 2025 Act regime, use the return schedules and instructions prescribed for that tax year.
Step 6: File the prescribed FTC statement.
Furnish Form 67 or Form 44, depending on the relevant legal period.
Under Rule 76(10), Form 44 must be accompanied by the required certificate or statement showing the nature of income and foreign tax deducted or paid.
The supporting document may originate from the foreign tax authority, the person responsible for tax deduction, or the taxpayer, subject to the conditions in Rule 76(11) and the required evidence of payment or deduction.
The CBDT Form 44 guidance describes electronic filing through the income-tax e-filing portal:
e-File → Income Tax Forms → File Income Tax Forms → Form No. 44.
The required sections, attachments, submission and electronic verification must be completed. Accountant verification is additionally required where Rule 76(16) applies.
Step 7: Retain the evidence and acknowledgements.
Preserve the foreign income records, qualifying foreign tax evidence, Indian computation, relevant schedules, prescribed FTC statement and acknowledgements.
These records should explain how the claimed credit was derived.
What if foreign tax is disputed?
Foreign tax that is disputed by the taxpayer cannot ordinarily be claimed as FTC while the dispute remains unresolved.
Under Rule 76(5) and (6), credit for disputed foreign tax may become allowable upon final settlement if the prescribed conditions are fulfilled.
These include submission of settlement evidence, proof that the tax liability has been discharged and an undertaking that no refund of the relevant amount has been or will be claimed.
The requirements must be completed within six months from the end of the month in which the dispute is finally settled.
When is Form 45 required?
Under Rule 76(15), Form 45 is the prescribed intimation following settlement of a foreign-tax dispute for which credit was not previously claimed.
It must be accompanied by the relevant evidence.
The official Form 45 procedure also requires the earlier Form 44 reference. Form 45 is therefore not a general substitute for Form 44.
If the relevant Form 44 was required to be verified by an accountant under Rule 76(16), Rule 76(17) requires accountant verification of the corresponding Form 45.
Claims under earlier periods must instead be considered under the 1961 Act and Rule 128, including section 155(14A) where applicable.
What happens if foreign tax is refunded after FTC was claimed?
A foreign-tax refund can affect an earlier Indian FTC claim.
For example, tax may have been paid abroad and credit claimed in India, followed by a later refund arising from a revised foreign return or another adjustment.
Rule 76(14) requires Form 44 to be furnished in specified cases involving the carry-back of a loss, revision of a return or similar statement, or another reason resulting in a refund of foreign tax for which credit has already been claimed.
The original credit amount, refunded tax and affected tax years must be reconciled.
The foreign refund should not be considered merely as a banking receipt without examining its Indian FTC consequences.
Which documents should you retain?
A claim should be supported by records that establish the underlying income, tax payment and Indian computation.
| Document category | Purpose |
|---|---|
| Indian residence and relevant-year records | Establish residential status and the period concerned |
| Foreign salary, dividend, interest, rental or capital-gain statements | Establish the income source, nature and amount |
| Foreign withholding certificates or tax authority records | Identify tax deducted, assessed or paid |
| Payment acknowledgements and deduction evidence | Substantiate the foreign tax payment |
| Applicable DTAA and residence documentation | Support the treaty position where relevant |
| Indian taxable-income computation | Reconcile foreign income with its Indian tax treatment |
| Relevant ITR schedules and FTC statement | Support consistency of income and relief disclosures |
| Foreign refunds and dispute settlements | Identify subsequent adjustments affecting credit |
The statutory attachment requirements are specific. Not every record in this table is necessarily required to be uploaded with every return.
A foreign withholding certificate evidences tax deduction. The Indian income computation establishes the charge to Indian tax. The applicable FTC provisions determine the credit.
They answer different questions.
Does an Indian FTC claim settle your foreign-country obligations?
No.
An Indian FTC claim does not establish whether tax was correctly imposed or withheld abroad.
For example, US dividend withholding may involve US tax-residence rules, treaty documentation and foreign refund procedures. Those are separate US-law questions and may require review by an appropriately qualified US professional.
Other foreign-country reporting obligations may also apply independently.
Similarly, Indian FEMA/RBI permissions, banking routes and foreign-asset disclosure obligations are not determined by the FTC rules.
Tax treatment, reporting and movement of money should not be treated as interchangeable.
What should you remember?
Foreign tax credit is relief against qualifying double taxation, not an automatic reimbursement of foreign withholding.
The amount depends on the income India taxes, the foreign tax legally eligible for relief, the corresponding Indian tax limitation, and compliance with the prescribed filing and evidence requirements.
The foreign tax statement starts the enquiry. It does not finish the Indian tax computation.
Scope note
This article explains general Indian foreign tax credit and reporting principles for the identified statutory periods. It does not determine an individual’s tax liability or filing position. The applicable treaty, income facts, residence, foreign-tax evidence and relevant year’s law must be examined. Foreign-country tax and reporting obligations require separate consideration under that country’s law.
Primary sources
- Income-tax Rules, 2026, Rule 76, G.S.R. 198(E), 20 March 2026
- Income-tax Act, 2025, as amended by Finance Act, 2026
- Income-tax Act, 2025, section 159 and section 160
- CBDT guidance on Forms 44 and 45
- Income Tax Department: Form 67 deadline guidance
- Income Tax Department: ITR-2 User Manual, AY 2026-27
- CBDT transition FAQs, section 536, released 6 July 2026
Sources and review
Published