What is the New Foreign Tax Credit (FTC)?
Furnishing relief to the assessee for the case of claiming the Foreign Tax Credit (FTC), the Central Board of Direct Taxes (CBDT) has changed Rules 128 of the income tax rules 1962.
Prior to the revision, the assessee can exclusively avail of FTC, via furnishing Form 67 including the required documents within the deadline of the ITR filing. There has been an amendment to the complaints.
An Indian resident under rule 128 permits the claim of credit toward the amount that he or she would have filed as a tax in a foreign country. Till now there are more than 6 cr ITRs that have been furnished for the AY 2022-23, mentioned as per the income tax e-filing portal.
Latest Update
02nd November 2022
- The Mumbai ITAT has shared a judgement in the case of the Anuj Bhagwati Nishant House vs Deputy Commissioner of Income Tax Circle. In the judgement said, the act cannot be overridden by rules, and the foreign tax credit can be taken advantage of under section 90. Read Order
New Foreign Tax Credit (FTC) Rule Benefits for Indian Residents
Below are the five points that an assessee must note down for the new FTC rule:
- Under the revised rule the assessee could claim the credit for the taxes furnished outside India prior to the finish of the assessment year when the ITR would get furnished within the mentioned due date. “The Statement in Form No. 67 can now be furnished on or before the end of the relevant Asstt Year. Notification No. 100/2022 issued,” in a tweet, the Income Tax Department expressed on19 August 2022.
- Through the execution of the latest rule, the assessee could claim FTC despite filing the updated income return when they need to file Form 67 prior to furnishing the return, as per the tax experts.
- The latest rule would introduce that the assessee will not permanently lose the FTC if they lose to furnish Form 67, the deadline for ITR filing.
- The latest rule is applicable retrospectively for providing the advantage to all FTC claims furnished in the present fiscal year “The pre-amended Rule required the FTC claim to be filed by the due date of furnishing the Income Tax Return. The amendment operates retrospectively so that this benefit is available to all FTC claims filed during the current Financial Year,” expressed the tax department.
- As per the experts, the former rule made issues for the Indian residents, who file foreign taxes during earning in foreign countries however their foreign tax returns were not being concluded through the Income tax return due date in India.
Documents Required to Claim FTC as Per New Rule
Documents needed for furnishing of claiming FTC, assessee needs to furnish following documents:-
- Statement in Form No.67 ii. certificate or statement mentioning the nature of income and the charge of tax deducted therefrom or paid by the assessee,-
- (a) from the foreign country or tax authority of;
- (b) from the person accountable for deduction of such tax; or
- (c) a signed statement by the assessee if it is attended by :
- Declaration of online payment challan for payment of tax or bank counter foil where the amount has been done by the assessee;
- Evidence of deduction where the tax has been subtracted. All these documents must be furnished on or before the last date of return of income within section 139(1) of the Act. Form No.67 must be furnished when the backward of loss carries from the recent year outcomes in foreign tax refund which claimed the credit in earlier year or years.
No FTC is Allowed on These Foreign Taxes
- Excluded income (such as the foreign earned income exclusion) Taxes
- On itemized deduction Taxes
- Foreign mineral income Taxes
- International boycott operations Taxes
- Combined foreign oil and gas income taxes
- U.S. persons regulating foreign corporations and partnerships who forget to file needed information returns Taxes
- Foreign tax splitting event Taxes
- Paid or accrued to a foreign country with which the United States has a social security agreement. For additional details about these agreements, refer to Totalization Agreements Social security taxes
The latest rule Wef 1st April 2022. Thus the assessee who is required to claim FTC for the FY2021-22 could now furnish Form 67 and assist with the documents till March 2023.
The Ministry of Finance circulated the new overseas investment rules and regulations in a bid to improve the functioning of the business.
The Ministry of Finance articulated in a statement on 22 August 2022, “In view of the evolving needs of businesses in India, in an increasingly integrated global market, there is a need of Indian corporates to be part of the global value chain. The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics. Clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment-related transactions that were earlier under approval route are now under the automatic route,”
