Let’s say an individual is in the nil tax slab in India but has capital losses from the US market. Now the FTC of the 25% tax deducted is not possible for him neither does he want it. But he wants these capital losses to be carried forward to the next years Will these losses be carried forward if he doesn’t upload the form 67, as he is not claiming anything as FTC, but files every other form correctly? He is planning to enter the amount to be claimed as NIL in the Schedule TR.
Another instance let’s say there is stcg or ltcg in India but overall the individual is in NIL tax slab rate. Then while filing schedule TR there is a section tax on normal provisions in India (lowest of either this or the 25% tax deducted in the US will be allowed to claim FTC). Now in this section do we need to calculate the dividend amount * 12.5% or 20%? Or does this tax on normal provisions in India means overall tax slab of an individual?
This FTC an be used to offset gains from any asset or source, whether from India or abroad, right?
Basically. if such an individual files their ITR (Schedule-TR) and Form-67 with relevant details, they should be able to claim the amount withheld as tax-refund (And receive it in the linked bank-account soon after the ITR is processed).
IMHO, based on ordinary income taxed as per tax slab of the individual.
Maybe a CA or @Quicko can confirm.
Not sure how this would work, as it is not a capital-loss, just tax-credit.
What this tax-credit can be (and is) used for is
to reduce any tax liability if one has any while filing ITR,
and any remaining excess tax-credit (if any) is refunded to the individual
(to their bank account) once the ITR is processed.
Thanks for replying. I am 100% certain that you won’t get this FTC amount as refund in your bank account. The amount was deducted by the US, why would the Indian IT give it back in your bank account? Only adjustment is allowed? Any ideas about the first question in the main post? I have tagged you in an other thread also.
Because India and the US have a DTAA (Double-Tax-Avoidance-Agreement)
that explcitly allows them to do this.
Sources: [1][2]
And the US IRS and Indian IT-Dept. will settle any accidental differences in their books, with the help of the details/proofs of tax-withholding in the US that one would have provided alongwith Form-67.
Agreed that all of this is assuming that there is indeed some FTC (foreign tax-credit).
Which was what the original post in this topic-thread asserted.
You are right that not all tax withheld in the US automatically qualifies for tax-credit in India.
So, one can start by first figuring out whether the tax deducted/withheld in the US qualifies for tax-credit.
While we wait for someone to confirm/deny this, and share where it is mentioned (or not),
i think an easy way you could confirm this on your own would be
to fill an ITR with Schedule-TR on https://eportal.incometax.gov.in
(no need to validate/verify, can discard the draft after looking at the computation below)
and check the value of the Refund field in Part-B TTI.
i.e. if one has zero/minimal tax liabilities (less than the tax-credit),
whether the tax-credit results in a tax-refund or not.
Practically speaking, sure,
as long as they file the details of the losses in appropriate schedules, as permitted.
(no relation to claiming foreign tax credit) (Note: I am not a CA, this is not financial advice).
Anecdotally, this is a somewhat common occurrence to see folks ready to forgo the amount withheld as foreign tax credit, especially if…
a. the tax-withheld is a minimal amount and
b. whoever they are consulting to file their ITR,
charges them a sum larger than the tax-credit amount,
to additionally file Schedule-TR and Form-67.
While folks do go ahead and choose to ignore the withheld amounts (available as foreign tax-credit), doing so may introduce inaccuracies between the other parts of the ITR they file (Schedule-FA, Schedule-FSI) and their actual accounts.
The theoretical risk is that it becomes challenging to keep track of and clarify the discrepancies in the various financial statements, in case of any queries. Hence, it is preferred to file Schedule-TR and Form-67.
Also, as more parts of the global financial systems are getting increasingly automated, discrepancies such as these will get flagged by automated cross-verifications while processing the ITR, and will tend to invite additional scrutiny of one’s ITR (not necessarily a bad thing), and delay the smooth processing of one’s ITR.
IMHO, you are rightly concerned to go ahead and file the Schedule-TR and Form-67 to ensure the accuracy of your ITR to the best of your knowledge/abilities.
Hi bro, From what I have learned through different threads and videos, IT does not care whether you claim anything from the FTC or not. So, even if u had lakhs in adjustment (not refund) and you don’t file form 67 then its ok. But all incomes should be reported.
The biggest question which remains is can this FTC amount from form 67 be adjusted against taxes arising from IFOS from India? Not getting any clarity on this.
AFAIK, there is no such generic restriction. This is similar to how advance-tax payments or TDS payments are adjusted against any tax-dues.
In the ITR, populating Schedule-TR with the amount of tax-withheld outside India, provides a tax-credit of the same amount, which gets adjusted against any overall tax-dues in Part-B TTI.
Update: The reference provided in this post below should clarify the doubts/corner-cases.
You are again comparing the FTC to the advace tax payments, which isnt the case. None of the articles or threads say so.
You are right about the second part, theoratically this should be the case, but I am not able to find any concrete answer on that part of any guideline from CBDT on this.
Only other point i can think of right now in support of this approach, is that the ITR utilities have supported this (adjusting foreign-tax credits against the final tax dues in the ITR) for several years now. Update: …to the extent of reducing applicable foreign-tax dues (i.e. relief from double taxation).
Unless a CA chimes-in with specific references, might be worth checking with one offline, especially if the amounts involved are significant.
The FTC credit is eligible to be deducted only against the tax if any, payable as per the Indian IT Act on the said foreign income.
There is no option to claim the excess FTC available after adjustment of tax payable in India, against any Indian income. Nor can it be carried forward to subsequent years.
Most of the treaties generally follows ordinary credit method wherein relief of taxes paid in foreign country would be limited to tax payable on said income in India which would be eligible for relief of tax u/s 90 and the balance would become ineligible for relief of tax u/s 90. Therefore, balance amount of foreign taxes if not allowed as deduction (under any other provision of the Act) would become a cost for the entity, despite being a genuine & legitimate expense incurred wholly and exclusively for the purpose of business.
The said income here refers to the foreign income.
On perusal of relevant ITR schedule [‘Schedule FSI - Details of Income from outside India and tax relief (available only in case of resident)’], it is clear that ‘Tax relief available in India’ is lower of (a) Tax paid outside India; and (b) 'Tax payable on such income under normal provisions in India’. The amount eligible for relief u/s 90/91 is only that amount of which deduction is allowed u/s 90/91 and not the entire taxes paid outside India.
Meaning of eligible for relief u/s 90/91
If income earned outside India is Rs.100, taxes paid in foreign country on said income is Rs.20 (tax on gross basis) and ‘Tax payable on such income under normal provisions in India’ is Rs.3 (tax on net basis), then ‘Tax relief available in India’ will be lower of Rs.20 and Rs.3 i.e. Rs.3. Thus, as deduction/relief u/s section 90/91 is restricted to Rs.3 then only that Rs.3 could be treated as eligible for relief of tax u/s 90/91.
