12 May 20266 min readFiled under NRI & Foreign IncomeForeign Income / DTAA / NRI

Foreign Tax Credit and Form 67: Don't Pay Tax Twice on Overseas Income

Earned income abroad and had tax withheld there? You can credit it against your Indian tax — but only if you file Form 67 on time. Here's how the Foreign Tax Credit and DTAA relief actually work.

CA Rahul Dang

Founder & Practice Lead

Foreign Tax Credit and Form 67: Don't Pay Tax Twice on Overseas Income

If you earned income abroad — salary, RSUs, freelance fees, dividends — and tax was deducted there, you should not have to pay full tax on it again in India. The mechanism that prevents this is the Foreign Tax Credit (FTC), and claiming it correctly hinges on one small form most people miss: Form 67.

What the Foreign Tax Credit does

When the same income is taxed in two countries, India lets you reduce your Indian tax by the tax you already paid abroad. The relief comes through Section 90 (where India has a DTAA with that country) or Section 91 (where it does not). In effect, you pay the higherof the two countries’ rates — not both rates stacked.

The credit is the lower of the foreign tax paid and the Indian tax payable on that same income.

Form 67 — the step that gets forgotten

To claim FTC you must file Form 67 online, under Rule 128, on or before the due date of your income tax return(and in any case before your return is processed). It asks for the foreign income, the country, and the tax paid, with proof. Skip it and the assessing officer can deny your credit — turning relief into double tax.

A real example

Agent Mehra, a Pune software consultant, earns ₹20 lakh from a US client who withholds ₹3 lakhin US tax. In India the tax on that same ₹20 lakh works out to ₹4 lakh. He claims FTC of ₹3 lakh (the lower figure) and pays only the ₹1 lakhbalance in India — provided he files Form 67 in time. Forget the form, and he risks paying the full ₹4 lakh on top of the US ₹3 lakh.

What to keep ready

A Tax Residency Certificate where the DTAA requires one.
Proof of foreign tax paid — withholding statements, foreign returns, or Form 1042-S / equivalents.
The income converted to rupees at the prescribed reference rate.

Common questions

Frequently asked.

What is Form 67 and why file it?

Form 67 is the statement you must furnish to claim a Foreign Tax Credit (FTC) in India for tax paid abroad on income that is also taxable here, under Section 90/90A (where a DTAA applies) or Section 91, read with Rule 128. Without a valid Form 67 the credit can be denied.

When must Form 67 be filed?

Under Rule 128(9), Form 67 must be furnished on or before the end of the relevant assessment year — for AY 2026-27 that is 31 December 2026 — and before you file the return, whether the original return under Section 139(1) or a belated return under Section 139(4). Filing it after the end of the assessment year risks losing the credit.

What documents support a Foreign Tax Credit claim?

You need proof of the foreign tax paid — a certificate or statement from the foreign tax authority or the foreign deductor, or the taxpayer's own signed statement with the acknowledgement of the foreign tax payment — together with the nature and amount of the income and the tax deducted or paid on it.

How much foreign tax credit do I get?

FTC is the lower of the Indian tax attributable to the doubly-taxed income and the foreign tax paid on it, computed source by source and applying the DTAA rate where a treaty exists. It cannot exceed the Indian tax on that income, and surcharge and cess are factored into the Indian-tax side.

Can I still claim FTC if I filed Form 67 late?

Several courts have treated the Form 67 timing as directory rather than mandatory and allowed a late-filed form, but that is litigation, not a right. The safe course is to file Form 67 within the Rule 128 timeline so the credit is allowed without a dispute.

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