How to Claim Foreign Tax Credit in India: A Step-by-Step Guide for FY 2026-27

How to Claim Foreign Tax Credit in India A Step by Step Guide for FY 2026 27

Description: Learn how Indian residents can claim Foreign Tax Credit for FY 2026-27, from eligibility and calculation to filing Form 67 correctly.

An Indian resident working with a UK client, holding US stocks, or drawing rent from a property abroad often hits the same problem: tax gets deducted abroad, then India taxes the same income again, since residents are taxed on worldwide earnings. Many simply absorb this without realising there’s a way out.

Foreign Tax Credit (FTC) exists to prevent exactly this — here’s who can claim it, how it’s calculated, and the filing steps before the deadline closes on you.

What FTC Means and Who Can Claim It

FTC lets a resident who’s already paid tax abroad offset that against their Indian tax liability on the same income — relevant to freelancers with overseas clients, employees on foreign assignments, investors holding US shares, and returning NRIs.

It’s governed by Rule 128 of the Income Tax Rules, 1962, plus relief under Sections 90, 90A, and 91 of the Income-tax Act, 1961. Under the Income-tax Act, 2025, this consolidates under Section 159, from Tax Year 2026-27 onward; FY 2025-26 (AY 2026-27) still falls under the old Act.

Only Indian residents can claim FTC. The income must be taxable in both countries, with tax actually paid abroad and documented.

A gap that trips up freelancers: under presumptive taxation (Section 44ADA, now Section 58), tax is computed on a flat percentage of gross receipts, not the actual income linked to a specific foreign payment. Since FTC works by matching tax paid abroad against tax actually payable in India on that same income, 44ADA taxpayers generally cannot claim credit for TDS deducted on their foreign income.

DTAA vs No-DTAA Relief

India has DTAAs with over 90 countries; which provision applies depends on whether one exists with the source country.

  • Section 90: applies with a DTAA — relief via the exemption method (income taxed in one country) or credit method (foreign tax credited against Indian tax)
  • Section 90A: works identically, for agreements made by specified associations rather than governments
  • Section 91: the fallback with no DTAA — unilateral relief, capped at the lower of the Indian or foreign tax rate

How Much Credit You Can Claim

Under Rule 128, FTC equals the lower of the Indian tax payable on that income or the foreign tax actually paid — computed per source country, then summed. Credit applies against tax, surcharge, and cess in India, not foreign interest, fees, or penalties, and applies even against Minimum Alternate Tax for companies. Foreign currency converts at the Telegraphic Transfer Buying Rate on the last day of the month before the tax was paid.

Example: Income taxed at 20% in a no-DTAA country, with 15% Indian tax on the same income — Section 91 caps relief at 15%, not the full 20%; the remaining 5% is a sunk cost. It’s worth a CA verifying this calculation — Tax Vic’s Tax Planning services handle this cross-border work.

Form 67: The Deadline You Cannot Miss

Disclosing foreign income in your return isn’t enough — Form 67 is what secures the credit. Per Rule 128(9), it must be filed by the end of the assessment year for which the foreign income was offered to tax. For AY 2026-27, that’s 31 December 2026. Miss it, and the credit is denied entirely, however valid the claim.

Form 67 may also be renumbered as Form 44 under the 2025 Act from 1 April 2026 — unconfirmed by a CBDT notification at time of writing, so check the Income Tax e-Filing Portal for the current label.

Filing Process

  • Gather the foreign tax authority’s certificate, proof of payment, a Tax Residency Certificate (if needed), and a self-attested statement if no formal certificate exists
  • Log in to the e-Filing Portal with PAN linked to Aadhaar, go to e-File → Income Tax Forms, and locate Form 67 (or 44)
  • Fill in your foreign income and credit details, attach documents, and submit via DSC or EVC
  • File your ITR for the same year, ensuring Schedule TR matches Form 67 exactly — mismatches trigger scrutiny

A CA managing this filing is worthwhile given the strict deadline; Tax Vic offers ITR filing support for residents and NRIs with foreign income.

Frequently Asked Questions

Can a non-resident claim FTC in India?
No — non-residents are taxed only on India-sourced income, so double taxation doesn’t arise.

I’ve opted for presumptive taxation under 44ADA. Can I claim FTC for TDS on my foreign income?
No. Since 44ADA taxes a flat percentage of gross receipts rather than actual income tied to that specific payment, there’s no matching Indian tax liability to credit the foreign TDS against.

What if I miss the Form 67 deadline?
The credit is denied for that assessment year, with no provision to file late.

I paid tax in a country with no DTAA. Can I still claim credit?
Yes, under Section 91 — capped at the lower of the Indian or foreign tax rate.

Which ITR form do I use?
Generally ITR-2 without business income, or ITR-3 if you have business or professional income alongside the foreign income.

Need help with this? If you’d like a CA to review your Foreign Tax Credit calculation or file Form 67 on your behalf, book a 15 min free consultation with Tax Vic.

Author: CA Reetu Bhandari

Published: 23 September 2023

Last Reviewed: 4 July 2026

Disclaimer: This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax provisions, forms, and filing deadlines are subject to change based on government notifications, and readers are advised to consult a qualified Chartered Accountant before making any tax-related decisions based on this content.