🌐 TDS Credit on Foreign Income: Guide for Indian Investors

Are you an Indian investor earning dividends or interest from foreign stocks or bank accounts? Wondering how to avoid paying tax twice?

✅ Good news: You can claim Foreign Tax Credit (FTC) under Indian tax law — but only if you follow the right steps.

Below is a complete, yet straightforward guide to help you secure your tax relief without any hassle. 👇

💼 What Is Foreign Tax Credit?

Indian residents have to pay tax on their global income, which means you must report any earnings from abroad. Such income may include:

• 🌍 Dividends from foreign stocks (for example, Apple or Microsoft)

• 💸 Interest on overseas bank deposits or bonds

• 📈 Capital gains from selling foreign shares

• 🏠 Rental income or royalties from foreign sources

If tax is already withheld abroad, you may receive credit for that amount in India, thanks to tax treaties and Section 90/91 of the Income Tax Act.

🧾 What Income Qualifies?

Below is a quick overview of common foreign-income types and whether they qualify for FTC:

Moreover, any other overseas income—such as fees for services rendered abroad—must be declared and may qualify for FTC if tax was paid overseas.

🌍 The DTAA Advantage

India has signed Double Taxation Avoidance Agreements (DTAA) with over 90 countries including the USA, UK, and Canada. With a DTAA, you can claim foreign tax credit up to the amount of Indian tax you owe on that same income.

However, if there is no DTAA between India and that country, Section 91 still offers unilateral relief. In other words, you’ll receive credit for foreign tax, but only up to the Indian tax on that income.

📑 Form 67: Must File to Claim Credit

To actually claim your FTC, you must file Form 67 online before or along with your ITR. Below is what you need to know:

✅ Documents Required

1. Certificate of Tax Deducted Abroad

   • For instance, a Form 1099 or 1042-S (for U.S. dividends/interest).

2. Proof of Payment

   • Copies of foreign bank statements or stamped receipts showing tax remitted.

3. Income Details

   • Convert all amounts into INR using the Reserve Bank’s rate (for example, SBI TT buying rate).

⏳ When to File

• Ideally, file Form 67 before or along with your original ITR.

• As per the CBDT’s 2022 amendment, taxpayers who file their ITR on time may submit Form 67 up to one year after the end of the financial year.

• Important: Any Form 67 filed after this extended deadline will be rejected, even if your ITR was timely.

🛑 Note: Failing to file Form 67 means you lose your right to FTC—no exceptions.

💡 How to File Form 67

1. Login to the Income Tax e-Filing portal.

2. Navigate to:
   e-File ➔ Income Tax Forms ➔ File Income Tax Forms ➔ Form 67

3. Fill in all details of foreign income and tax paid.

4. Attach scanned copies of your tax certificate and proof of payment.

5. e-Verify the form using Aadhaar OTP or EVC.

Furthermore, you do not need a Chartered Accountant’s certificate to validate Form 67. The Income Tax Department has clarified that a CA certificate is not mandatory.

🧮 Reporting Foreign Income in Your ITR

When you file your ITR (usually ITR-2 or ITR-3 for individuals with foreign income), include your overseas earnings in these schedules:

• Schedule FSI (Foreign Source Income):

  • Enter each type of foreign income in INR (for example, ₹82,500 for a $1,000 dividend converted at ₹82.50).

• Schedule TR (Tax Relief):

  • Summarize the total foreign tax credit you are claiming.

  • List the country, whether a DTAA applies (Section 90) or not (Section 91), and amounts.

• Schedule FA (Foreign Assets):

  • Disclose all foreign assets if their combined value or income exceeds the threshold.

  • This includes bank accounts, shares, property, etc.

Pro Tip: Always use the RBI or SBI TT buying rates on the date of transaction to convert amounts into INR. This avoids mismatches that can trigger notices.

🚫 Common Mistakes to Avoid

1. Missing Form 67

   • Without it, your FTC claim will be automatically denied.

2. Claiming More Credit Than You Owe

   • Credit is the lower of (a) foreign tax paid, and (b) Indian tax on that income.

3. Incomplete Documentation

   • Ensure both the certificate and proof of payment are attached.

4. Late Filing

   • Even if your ITR is on time, missing Form 67’s deadline means losing credit.

5. Wrong ITR Schedules

   • Always report in FSI/TR/FA, not under “Income from Other Sources” alone.

As a result, carefully review your paperwork before submission.

🆕 What’s New?

• Extended Deadline for Form 67: Thanks to the 2022 CBDT amendment, you now have up to one year from the FY’s end—provided your ITR was filed on time.

• No CA Certificate Needed: Form 67 no longer requires a CA’s attestation.

• IT Department Campaigns: In late 2024, the Income Tax Department ran outreach to remind taxpayers about foreign-income disclosures.

• Hefty Penalties for Non-Disclosure: Under the Black Money Act, failure to disclose foreign income or assets can attract penalties up to ₹10 lakh.

⚠️ If you missed reporting foreign income in FY 2023–24, revise your ITR by 31 December 2024 to avoid penalties.

📌 Quick Checklist Before You File

• Have you identified all foreign income received during the year?

• Did you confirm foreign tax was actually paid (not just deducted)?

• Have you gathered certificates and proof of payment?

• Is Form 67 filed and e-verified?

• Have you declared foreign income correctly under Schedule FSI?

• Does Schedule TR accurately reflect the credit you’re claiming (limited to Indian tax on that income)?

If you can answer “yes” to each of these, you’re ready to file!

📝 Conclusion

If you’re investing globally, don’t let double taxation eat into your returns. Instead:

1. File Form 67 on time.

2. Claim your TDS credit up to the Indian tax limit.

3. Stay compliant and make the most of your overseas gains.

Need assistance? Check the official Form 67 user guide or consult a tax professional.

📢 Have questions or need a step-by-step walkthrough?  Book a 1-on-1 consultation!