IT Department allows taxpayers more time to claim credit for taxes paid abroad

The income tax department stated, taxpayers can claim a credit for taxes paid outside of India before the end of the assessment year if their IT returns are submitted by the deadline. The opportunity to claim credit for taxes paid outside of India was formerly limited since the Foreign Tax Credit (FTC) could only be claimed if Form-67 and the appropriate papers were submitted by the original return’s due date.

The Central Board of Direct Taxes (CBDT) modified the tax rules to give taxpayers relief when claiming the Foreign Tax Credit (FTC).

The income tax division said via tweet that “the Statement in Form No. 67 can now be submitted on or before the end of the relevant AY.”

This incentive is accessible to all FTC claims submitted during the current financial year because the provision acts retroactively, it was added.

Sachin Garg, Partner-Direct Taxation at Nangia Andersen LLP, stated that the amendment has given taxpayers much-needed relief. If the return is submitted by the original due date or date of submitting a belated tax return, the taxpayer may now claim FTC by submitting Form-67 along with the required documents prior to the end of the assessment year.

“As long as Form 67 is submitted prior to filing an updated return of income, the FTC may now be claimed. If Form 67 is not submitted by the deadline for filing an income tax return, taxpayers would not lose their FTC permanently, which will undoubtedly improve India’s ease of doing business ” added Garg.

For the taxpayers, this relaxation in filing Form-67 until the end of the assessment year rather than before the due date of filing the return is a relief because they can still claim FTC after filing the return, according to AKM Global Head of Tax Markets Yeeshu Sehgal.

Sehgal continued, “This will also result in a decrease in tax disputes relating to FTCs since there have been differing interpretations on the allowability of FTC in case of belated and non-filing of Form 67 at this time since tax rules do not stipulate any repercussions for non-filing of such form.”