The Central Board of Direct Taxes (CBDT) on Friday said taxpayers can claim credit for taxes paid overseas before the end of the assessment year if the income tax return is filed within the stipulated deadline, in a relief to such assessees.
Hitherto, taxpayers could claim foreign tax credit (FTC) only if Form- 67, along with necessary documents were filed within the due date for filing the original return, thereby restricting the ability to claim credit for taxes paid outside India.
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This created many challenges for Indian residents who had earned abroad and incurred foreign taxes on such income as their foreign tax returns were not finalised by then, said Alok Agrawal, Partner, Deloitte India.
“CBDT amends Rule 128 of the Income Tax Rules, 1962, providing major relief to taxpayers in the matter of claiming foreign tax credit,” the income tax department tweeted.
Further, the FTC can now be claimed even when filing an updated return of income provided Form-67 is furnished before filing such return.
“This will certainly augment ease of doing business in India and prevent taxpayers from losing FTC permanently if Form-67 is not filed within the due date of filing return of income,” Nangia Andersen Partner- Direct Taxation, Sachin Garg said.
The amendment is effective April 2022 and taxpayers can now file these documents by March 2023 in relation to their returns for tax year 2021-22.
