Credit for foreign taxes paid

You need to pay tax on the salary earned by you from September 2018- march 2019 since you are a resident but not ordinary resident so entire salary earned in India would be taxable in India as per Income tax law.

You should have checked DTAA before paying taxes in USA. now you can take credit of such taxes in India by filing a declaration and form.

The conversion rate I guess would be the rate on the day on which you have paid taxes in USA.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Dear Sir,

Hope you are doing well !!

A resident will be charged to tax in India on his global income i.e. income earned in India as well as income earned outside India.

However, you can claim the foreign tax credit on your US income u/s 90 & 91 of income tax act.

Under these sections, if the taxpayer is a resident of India, and he has paid taxes outside India, he can claim a credit of such foreign taxes paid against his tax payable in India.

In accordance with Rule 128, in order to claim FTC, the taxpayer is required to file following documents on or before due date of filing of return:

1. A statement of :

• foreign income offered to tax
• foreign tax deducted or paid on such income in Form No. 67

2. Certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the taxpayer :

• From the tax authority of the foreign country
• from the person responsible for the deduction of such tax
• signed by the taxpayer

3. Proof of payment of taxes outside India

The important thing here is first you need to file form 67 online before filing your income tax return for the relevant year which will conraic information of income and tax on same in foreign countries and next would be a certificate from the person who has deducted such tax and along with the challan of such tax being paid to the federal government.

If you need any help in filing your income tax return or any other assistance feel free to contact and also would advise you to also have a look at dtaa before filing your return of income.

Hi

You need to file form  67 of income tax act before due date of return filling for taking credit  of taxed paid in foreign country.

You can claim tax deducted or paid  in foreign countries on all income earned there.

Hope it helps 

Hi,

- As you have mentioned that your residential status in India for the F.Y. 2018-19 is RNOR. In reference to RNOR status only Indian income is taxable except in two cases which are not applicable to you. In India, the Previous year starts from 01.04.2018 to 31.03.2019. Salary earned by you during the period April 18 till August 18 will be considered as foreign income and salary earned from Sept. 18 till March 19 will be considered as Indian Income. 

Below is the reply of your questions.

1) Salary from Sept. 18 till March 19.

2) As the salary for the period Sept. 18 till March 19 is doubly taxed therefore you are eligible for credit of taxes paid in USA on the salary for the SAME PERIOD ONLY i.e. Sept. 18 till March 19. There is a separate column in ITR to claim credit of foreign taxes paid u/s 90/91.

3) Yes that's why you are eligible in India to claim the credit of foreign taxes. 

4) Only federal taxes.

5) Date of payment of tax.

Thanks

Hi, 

1) To claim the credit of foreign taxes paid in USA, you need to file Form 67 online before filing of ITR mentioning the details of the foreign income earned and taxes paid.

2) Credit of taxes means tax paid on doubly taxed income in foreign country.

3) Section 90/91 in the ITR.

Thanks

Hello,

Since your residential status is RNOR (Resident but Not Ordinary Resident), income earned outside India will not be taxable in India and you will be required to pay tax in India only on income earned in India.

Hence For F.Y. 2018-19, you will be required to pay tax on your salary income earned from Sept. 2018 - March 2019 only.

Yes, you can claim credit of taxes paid in the USA on your salary income from Sept. 2018 - Dec. 2019 under Section 90/91 of the Income Tax Act.

You will be allowed to take credit of both Federal Tax and State Tax paid in the USA but not of any Medicare or Social Security Taxes.

The conversion rate would be of the date of payment.

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani

You will have to fill Form 67 online before filling the income tax return.

Yes, tax on salary income from Sept. 2018 - Dec. 2018 paid in the USA would be deducted.

You will have to mention it under schedule FSI in which you will have to add the details of the credit. For relief, section 90 would be useful. However, it would be advisable to hire a CA for filing your Income tax return, to avoid any error in the return.

Regards,

CA Hunny Badlani

Hi,

As per rule 128 (1) of the Income Tax Rules, 1962, an assessee who is a resident shall be given a credit for an amount of any foreign tax which is paid by the assessee / taxpayer in a country or specified territory outside India. Such credit shall be available in the form of deduction or otherwise in the year in which the income corresponding to such tax has been accessible to tax in India.

As per rule 128 (2) of the Income Tax Rules, 1962, foreign tax means and includes the following –

1. Tax covered under the agreement with the foreign countries or specified territories outside India for the relief or avoidance of double taxation of income as per section 90 or section 90A of the Income Tax Act.
2. Tax payable under the law in force in the country or specified territory outside India in the nature of income tax referred to in clause (iv) of explanation to section 91 of the Income Tax Act.

Vide notification no. 9 dated 19th September, 2017, the Central Board of Direct Taxes, has provided the prescribed procedure for filing online Form No. 67. Relevant steps to be followed for filing the form are narrated hereunder –

1. The assessee is required to log in the e-filing portal using appropriate user id and password;
2. Navigate the path e-file > prepare and submit online forms (other than ITR) > select form 67;
3. Details to be provided in form no. 67 are –

• Name of the assessee;
• Permanent Account Number;
• Address;
• Assessment Year for which the foreign tax credit is claimed;
• Details of income derived from the country or specified territory outside India or Foreign Tax Credit claimed;
• Whether any refund of the foreign tax has been claimed in any prior accounting year as a result of carry backward losses? If yes, then following further details need to be provided –

1. The accounting year to which such loss relates.
2. The accounting year in which set off of carry backward of loss has been undertaken.
3. The refund claim for the accounting year.

• Whether credit for any foreign tax has been claimed which is under dispute? If yes, then following further details need to be provided –

1. The nature and amount of income in respect of which tax is disputed.
2. The amount of such disputed tax.
3. Form no. 67 can be submitted using the Digital Signature Certificate or Electronic Verification Code.

1) The form you are required to file in india is Tax Residency certificate obtained from indian authority along with your income tax return filing and now a separate form 67.

2) Yes you can claim credit and net off liability

3) There is specific portion where you need to mentioned total income earned in foreign, tax paid there, local tax registration no. if obtained, income taxability in india and net credit claimed, if credit claimed than under which article of DTAA such credit is claimed