Foreign Tax Credit & DTAA Relief Calculator

An Indian RESIDENT who pays tax abroad on income that India also taxes can reduce the Indian tax by the foreign tax paid – under section 90 (treaty countries) or section 91 (others), operationalised by Rule 128. The credit is the LOWER of the foreign tax and the Indian tax on that income, computed separately for each source in each country. It offsets tax, surcharge and cess – never interest, fees or penalties.

Form 67 is the statement of foreign income and foreign tax you must e-file to claim FTC. For AY 2026-27 it can legally be filed up to 31 March 2027 (end of the assessment year), but file it BEFORE submitting your ITR – CPC’s automated processing denies FTC where Form 67 is not on record, and although courts consistently hold the deadline directory (Brinda Rama Krishna, Sonakshi Sinha, the Madras High Court in Duraiswamy Kumaraswamy), getting the credit back means rectification or appeal.

The mechanics survive with new numbers: section 90 becomes 159, section 91 becomes 160, Rule 128 becomes Rule 76 of the Income-tax Rules 2026, and Form 67 becomes FORM 44 – with a deadline of 12 months from the end of the tax year and, importantly, a CA-verified form where the foreign tax claimed exceeds Rs 1,00,000. Disputed foreign tax gets its own Form 45.

No. The India-US treaty caps US tax on portfolio dividends at 25 percent – and Rule 128(5) ignores foreign tax beyond the treaty rate. So on a Rs 1,00,000 dividend with Rs 30,000 withheld, only Rs 25,000 enters the credit computation (and less if the Indian tax on it is lower). File Form W-8BEN with the US broker to get the withholding itself reduced to the treaty rate.

No. The India-US treaty expressly excludes social security taxes from its scope, they are not income taxes for section 91 either, and no Indian court has allowed them. Treat them as a cost. Only federal income tax (and state income tax via the section 91 route) qualify.

The treaty does not cover state taxes, but the Karnataka High Court in Wipro and the Mumbai Tribunal in Tata Sons allowed credit under section 91 – reasoning that section 91 does not distinguish between federal and state taxes. It is a defensible, litigated position: CPC often denies it in processing, so claim it with disclosure and be prepared to pursue rectification or appeal.

At the SBI telegraphic transfer BUYING rate on the LAST day of the month immediately PRECEDING the month in which the tax was paid or withheld (Rule 128(5) read with Rule 26). For RSU withholding, that means the TTBR of the month-end before each vest date – not the year-end rate and not the rate used for the income itself.

Credit follows the year the income is OFFERED in India (Rule 128(1)). Map each pay or vest event to the Indian FY it falls in and take the actual withholding per event from pay stubs, W-2 or 1042-S. If only the final US return figure is available, apportion it in the ratio of income offered in each Indian FY. If the US refunds over-withheld tax, only the final tax is creditable.

If you remained resident (left India after 182 days), India taxes your worldwide salary including the foreign months. The work country usually taxes the same salary too. Relief: the treaty dependent-personal-services article decides where it is taxable, and India gives FTC for the foreign tax on the doubly-taxed portion – exactly the Tab B computation here. From next year you are likely non-resident and only Indian income remains taxable – check with our residential status calculator.

Whenever the treaty cap is lower – section 90(2) lets you pick whichever is beneficial, item by item. Typical wins: NRO interest (30 percent domestic vs 10-15 percent treaty), dividends for UK/UAE/Germany/Saudi residents (10 or 5 percent vs 20.8 percent). Typical non-wins: dividends for US and Canada residents (treaty 25 percent – stay domestic) and any case where TDS was already deducted low. Treaty rates are final – no surcharge or cess is added on them.

Tax Residency Certificate from your country of residence (section 90(4) makes it mandatory), Form 10F filed electronically on the Indian portal (non-residents without PAN can register and e-file it since October 2023), a beneficial-ownership self-declaration, and for royalty/FTS a no-PE declaration. Without a PAN, Rule 37BC still switches off the 20 percent section 206AA rate for interest, royalty, FTS and dividend if you give the payer your details, TRC and home TIN.

Yes – section 91 gives unilateral relief: the doubly-taxed income times the LOWER of the Indian average rate and the foreign effective rate. The Indian rate is your tax (with surcharge and cess) divided by total income; the foreign rate is the foreign tax divided by the income as assessed there.

No. If the foreign tax exceeds the Indian tax on that income (or the treaty cap), the excess simply lapses – India refunds only Indian tax. There is no FTC carry-forward or pooling across sources or countries in Rule 128.

They are separate obligations. An ordinarily-resident taxpayer with foreign shares, RSUs (even unvested ESPP/RSU accounts), foreign bank accounts or property must report them in Schedule FA regardless of tax paid – a Rs 10 lakh Black Money Act penalty applies per year of non-disclosure. FTC needs Form 67; disclosure needs Schedule FA; do both.

Rule 128(8): a certificate from the foreign tax authority, OR from the deductor (W-2, Form 1042-S, dividend vouchers), OR a self-attested statement WITH proof of payment/deduction. Keep the foreign return once filed – if the final foreign tax is lower than withheld, only the final figure is creditable.