For Indian residents earning foreign income, avoiding double taxation is crucial. The Indian Income Tax Act, 1961, provides mechanisms under Sections 90, 90A, and 91 to claim a Foreign Tax Credit (FTC) and reduce the burden of being taxed in both the foreign country and India. Here is a detailed step-by-step guide to help you understand and claim foreign tax credit accurately in your Income Tax Return (ITR).
Understanding Sections 90, 90A, and 91
- Section 90: Applicable when India has a Double Taxation Avoidance Agreement (DTAA) with the foreign country. Relief is available through the exemption or credit method.
- Section 90A: Similar to Section 90 but deals with DTAAs between India and specified associations.
- Section 91: Applies when no DTAA exists. Provides unilateral relief in the form of tax credit limited to the lower of the Indian tax or foreign tax paid.
Steps to Claim Foreign Tax Credit in ITR
Step 1: Convert Foreign Income to INR
- Convert all foreign income into Indian Rupees (INR) using the applicable exchange rate.
- As per Rule 115, the rate to be used is the Telegraphic Transfer Buying Rate (TTBR) of the State Bank of India (SBI) as on the last day of the month preceding the month in which the income is earned.
Step 2: Include Foreign Income in ITR
- Report the income under the appropriate head such as ‘Income from Salaries’ or ‘Income from Other Sources’.
- Fill Schedule FSI (Foreign Source Income) in the ITR form to report:
- Country name and code
- Income earned
- Nature of income
- Tax paid outside India
Step 3: Obtain Necessary Documents
To support your claim for FTC, you must collect and maintain the following documents:
- Proof of Foreign Tax Paid such as:
- Tax payment receipts
- Withholding tax certificates (e.g., Form 1042S for U.S. income)
- Tax assessment orders or return copies from the foreign country
- Foreign Tax Return Copy (if applicable) to substantiate the tax paid.
Step 4: File Form 67
- Form 67 is mandatory for claiming FTC under Sections 90, 90A, and 91.
How to File Form 67:
- Log in to the Income Tax e-filing portal.
- Navigate to e-File > Income Tax Forms > File Income Tax Forms.
- Select Form 67, choose the assessment year.
- Fill in:
- Details of income earned abroad
- Foreign taxes paid
- Section under which relief is claimed (90/90A/91)
- Submit and e-verify the form.
Important Notes:
- Form 67 can be filed before or at the time of filing your ITR.
Step 5: Check Schedule TR in ITR
- After filling Schedule FSI, the details automatically flow to Schedule TR (Tax Relief).
- The system calculates tax relief based on:
- Tax paid in foreign currency (converted to INR)
- Tax payable on the same income in India
- The allowable relief is the lower of the two.
Step 6: Submit and Verify ITR
- Review all data in the ITR form, especially Schedules FSI and TR.
- Submit your return and complete e-verification through:
- Aadhaar OTP
- Net banking
- Demat account
- Electronic verification code (EVC)
Summary Table: Key Steps to Claim FTC
| Step | Action | Form/Document |
| 1 | Convert foreign income to INR | – |
| 2 | Include foreign income in ITR | Schedule FSI |
| 3 | Obtain TRC and proof of tax paid | TRC, Tax Receipts |
| 4 | File Form 67 | Form 67 |
| 5 | Check Schedule TR | Schedule TR |
| 6 | Submit and e-verify ITR | ITR Form |
Important Considerations
- Mandatory Form 67: Without Form 67, your FTC claim may be rejected.
- Accuracy is Key: Ensure that amounts in Form 67, Schedule FSI, and Schedule TR match.
- Double Check Exchange Rates: Use the correct TTBR rate by SBI for conversions.
- Upload Documents Clearly: Illegible or incomplete documents may lead to denial of credit.
ITR Form to Use for Foreign Income
- If you are a resident individual with foreign income, you must file:
- ITR-2: If your income is from salary, foreign assets, or investments abroad, and you do not have business income.
- ITR-3: If you have business/professional income along with foreign income.
Due Dates for Filing ITR (AY 2025–26)
- Original Due Date: 31st July 2025 for individuals not subject to audit.
- Extended Due Date: As per CBDT Circular No. 06/2025, the deadline has been extended to 15th September 2025.
Filing on time is essential to ensure your FTC claim is processed without delay.
Final Thoughts
Claiming a Foreign Tax Credit under Sections 90, 90A, or 91 is a powerful tool to avoid double taxation. While the process involves technical compliance and documentation, it is completely manageable if approached methodically. Filing Form 67 accurately, maintaining proof of foreign tax paid, and completing the ITR with correct schedules are the key pillars of a successful FTC claim.
If you’re unsure about how to proceed, it is advisable to consult a chartered accountant or tax consultant familiar with international tax matters. This ensures your filing is compliant, your credit is allowed, and you stay on the right side of the law while maximizing your tax efficiency.
Have you earned income abroad this year? Don’t miss out on claiming your rightful tax credit, start your ITR filing early and avoid last-minute hassles!
