Background
A resident taxpayer is taxed on his global income. On the foreign-sourced income, the Source Country may levy tax. To grant credit for such taxes, Foreign Tax Credit (FTC) Rules (i.e. Rule 128 of the Income-tax Rules, 1962 (IT Rules)) were introduced. One of the requirements for claiming FTC is filing Form 67 before the due date of furnishing the tax return under section 139(1) of the Income-tax Act, 1961 (IT Act). Due to various reasons, there were instances where Form 67 could not be filed before the prescribed due date. Hence, representations were made before the CBDT to relax the timeline for submission of Form 67. In this regard, recently, the Central Board of Direct Taxes (CBDT) has issued a notification1 relaxing the time limit for furnishing Form 67 by substituting existing Rule128(9) of the IT Rules.
We, at BDO in India, have analysed and summarised the said notification and provided our comments on its impact hereunder:
- Form 67 can be furnished anytime within one year from the end of the relevant Fiscal Year (FY) in which the foreign-sourced income is offered to tax in India provided the tax return for such FY has been furnished within the specified due date under sec 139(1) or 139(4) of the IT Act
- Where an updated tax return is furnished, Form 67 shall be furnished on or before the date on which the updated return is furnished to the extent it relates to income included in the updated return
- The revised timeline applies to all the FTC claims furnished during the FY 2022-2023 and onwards
BDO comments
This is a welcome notification. There are many instances where delay in filing Form 67 is due to reasons beyond the taxpayer’s control for e.g. the FTC amount can only be decided once the taxpayer has filed his tax return in a foreign jurisdiction or has received relevant supporting evidence of taxes withheld in a foreign jurisdiction, the due date of filing a tax return in a foreign jurisdiction and India is different, etc. This notification will act as a cushion for all such matters. Further, this notification is in line with judicial precedent2 wherein it has been held that if Form 67 is not furnished before the due date, the same does not deprive the taxpayer of FTC claim done subsequently.
1Notification No. 100/2022, dated 18 August 2022
2Refer our tax alert- https://www.bdo.in/en-gb/insights/alerts-updates/direct-tax-alert-bangalore-itat-allows-ftc-to-employee-on-salary-earned-in-australia,-holds-the-re
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