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Winning the Case for Foreign Tax Credit: A Success Story of Our NRI Client
Foreign taxes, international rules, and strict deadlines—these are everyday challenges for many NRIs earning across borders. When income is taxed both in the country where it is earned and again in India, it feels unfair and stressful. This is where the Foreign Tax Credit (FTC) becomes a lifesaver. But claiming it correctly, especially under India’s tax rules, can be tricky.
At Hemal Parikh and Company LLP, we help NRIs navigate this complexity with ease. In this article, we break down how FTC works, the challenges NRIs face, and how we successfully won an FTC claim for an NRI client who was initially denied his rightful tax credit.
This story is not just about one case it’s about hope, clarity, and knowing your rights. Let’s dive in.
What Is Foreign Tax Credit (FTC)?
Foreign Tax Credit (FTC) is a tax benefit that helps you avoid paying tax twice on the same income—once in the foreign country where you earn money and again in India.
Foreign Tax Credit: A tax relief that lets you reduce your Indian tax by the tax you already paid in another country.
FTC applies when:
- You are an NRI earning in another country.
- You have already paid tax on that income in that country.
- You also need to report that same income in your Indian tax return.
Governing Laws in India
FTC for NRIs is controlled under:
- Section 90/91 of the Income Tax Act
- Rule 128 of the Income Tax Rules
- Form 67 filing requirement
These rules ensure fairness in taxation while keeping the processes structured and clear.
What Is Form 67?
A mandatory form that must be submitted before filing the ITR to claim FTC for taxes paid outside India.
Key Rules About Form 67
- It must be filed before filing ITR under Section 139(1)—the original due date.
- Form 67 is also allowed with a belated return under Section 139(4), but must be filed before the end of the assessment year.
- For AY 2025–26, the Form 67 deadline to claim FTC is 31st December 2024.
- If not filed on time, FTC may be denied—even if the delay is genuine.
Why Claiming FTC Matters for NRIs
NRIs often earn in countries where taxes are deducted at source. Without FTC:
- You end up paying tax twice.
- You lose a major financial benefit.
- Your overall tax liability becomes unfairly high.
With FTC:
- You save money.
- You follow legal compliance.
- You stay protected under DTAA agreements.
This is why FTC is not just a benefit it is your right.
Challenges in Claiming Foreign Tax Credit
Even though the rules seem straightforward, many NRIs struggle with the process. Let’s look at the biggest hurdles.
1. Strict Deadlines
If Form 67 is not filed before the ITR deadline:
- FTC is usually denied.
- Appeals and clarifications become necessary.
- Even genuine reasons like illness may not be accepted at the processing stage.
2. Documentation Issues
NRIs often:
- Have multiple foreign income sources.
- Face time zone barriers.
- Struggle to gather foreign tax certificates.
- Misunderstand document formats required by Indian authorities.
3. Interpretation Problems
Tax officers may:
- Treat procedural delay as a violation.
- Deny FTC even when taxes were paid abroad.
- Miss recent judicial precedents that allow FTC despite late Form 67.
Result: NRIs lose huge amounts of money due to minor procedural lapses.
Why Residential Status Matters for Claiming FTC
Your tax rights depend heavily on your residential status in India.
How Residential Status Is Determined
You are Resident in India if:
- You stayed in India for 182+ days in the financial year, OR
- You stayed 60 days in the last year + 365 days in the last 4 years.
You are Resident and Ordinarily Resident (ROR) if:
- You earn income in India, AND
- Your income is received or deemed to be received in India.
Correct residential status ensures:
- Correct taxation.
- Correct eligibility for FTC.
- Compliance with global income reporting rules.
How Hemal Parikh and Company LLP Supports NRIs
We know how complicated international tax compliance can feel. Our team focuses on simplifying the process for you.
1. Comprehensive Assessment
We review:
- Residential status
- Foreign income slips
- Form 67 requirements
- DTAA rules
- Foreign tax payment proofs
Our goal? Zero documentation errors.
2. Expert Representation
If FTC is denied:
- We file appeals.
- We present legal arguments.
- We rely on strong judicial precedents.
- We defend your rights before authorities like CIT(A) and ITAT.
3. Smooth Compliance
We ensure:
- Timely Form 67 filing
- Correct ITR filing
- Perfect documentation
- End-to-end follow-up with the department
This means peace of mind for NRIs living abroad.
Winning an FTC Case for Our NRI Client
We recently helped our NRI client, Mr. Abhinav, who was denied Foreign Tax Credit (FTC) despite being fully eligible under the India–UK DTAA. He was working in the UK, earning ₹1 crore annually, and had already paid ₹37.79 lakh as foreign tax. Due to COVID-related challenges and health issues, he filed his Indian tax return after the due date and submitted Form 67 along with his belated return. However, CPC Bengaluru rejected his FTC claim by strictly applying Rule 128(9), stating that delay in filing Form 67 automatically disqualifies the claim.
To protect his rights, we represented him before the Income Tax Appellate Tribunal (ITAT) Kolkata, arguing that FTC is a substantive right under DTAA and cannot be denied for minor procedural delays. We relied on strong judicial precedents supporting this view. The Tribunal ruled in his favor and restored his full FTC amount, saving him lakhs of rupees.
How NRIs Can Claim Foreign Tax Credit
Step 1: Collect Foreign Income Details
Gather:
- Details of foreign income
- Foreign tax paid
- Foreign tax returns (if any)
Our goal? Zero documentation errors.
Step 2: Convert Foreign Currency
Use:
-
Telegraphic transfer buying rate (TTBR)
Verify the rate from your bank or official sources.
Step 3: File Form 67
Include:
- Details of foreign income
- Foreign tax paid
- Documents or certificates
Step 4: File Your ITR
Ensure:
- All foreign income is reported
- Proper DTAA section is used
- Residential status is correct
Step 5: Keep Documents Ready
Keep copies for at least 6 years.
Common Mistakes NRIs Make
Mistake 1: Late Filing of Form 67
Fix: File before the assessment year ends.
Mistake 2: Incorrect Residential Status
Fix: Use physical stay data and double-check.
Mistake 3: Missing Foreign Tax Documents
Fix: Request foreign employer or tax authority early.
Mistake 4: Wrong Currency Conversion
Fix: Use official TTBR.
Mistake 5: Relying on Non-Expert Advice
Fix: Consult a professional familiar with NRI tax rules.
Actionable Checklist for NRIs Claiming FTC
- Gather all foreign income slips
- Collect foreign tax paid proofs
- Check your residential status
- Convert income using correct TTBR
- Prepare and submit Form 67
- File ITR on time
- Verify DTAA applicability
- Keep all documents ready for future scrutiny
Conclusion
Claiming Foreign Tax Credit can feel complex, but it doesn’t have to be. With the right guidance and timely action, NRIs can easily avoid double taxation and safeguard their hard-earned money. Our success story with Mr. Abhinav shows that even if your claim is denied due to a technical delay, the law is still on your side and with the right representation, justice can be achieved.
If you are an NRI struggling with Form 67, FTC calculations, or denied claims, why not take expert help?
Your tax rights matter. Your peace of mind matters.
