19/08/2025
Cross-Border Tax Relief: Legal Framework of TRC, Form No. 67 & Foreign Tax Credit Claims
1. Introduction:- With the increasing mobility of capital and services, Indian residents frequently earn income from sources situated outside India. Such income often suffers taxation both in the source country and in India, resulting in double taxation. The Income-tax Act, 1961 mitigates this through:
(i) Section 90 & 90A – Double Taxation Avoidance Agreements (DTAAs) with foreign countries or specified territories.
(ii) Section 91 – Unilateral relief in absence of a DTAA.
(iii) Rule 128 – Prescribing conditions for claiming Foreign Tax Credit (FTC).
Three critical compliance tools in this process are:
(i) Tax Residency Certificate (TRC)
(ii) Form No. 67
(iii) Correct filing of FTC claim in ITR
2. Tax Residency Certificate (TRC) Statutory Reference: Section 90(4), Section 90A(4), Rule 21AB.
Definition: A TRC is an official document issued by the tax authority of a country, certifying that the taxpayer is a resident of that country for the purposes of its tax laws during a specified period.
Applicability:
• Non-resident earning income in India: To claim DTAA benefit in India, a TRC issued by the Government of the country of residence is mandatory.
• Indian resident earning foreign income: To claim DTAA relief abroad, an Indian TRC (Form 10FA application → Form 10FB issuance) is generally required.
• Mandatory particulars in TRC (Rule 21AB(2)):
1. Name, status (individual/company, etc.), and nationality (for individuals)
2. Country of residence
3. Tax Identification Number (TIN)
4. Residential status for the purposes of tax
5. Period for which the certificate is applicable
6. Address in the country of residence
• Without TRC:
DTAA relief may be denied notwithstanding the existence of other evidence. The law also allows the Central Board of Direct Taxes (CBDT) to prescribe “such other documents” (Form 10F, passport, etc.) in addition to TRC.
3. Form No. 67 – Procedural Compliance for FTC:- Statutory Reference: Rule 128(9) read with Section 90, 90A, and 91.
Purpose: Mandatory for a resident taxpayer to furnish Form No. 67 to claim credit for foreign taxes paid on income doubly taxed.
Eligibility: Available to all resident taxpayers (including individuals, firms, and companies) who have paid foreign tax on income offered to tax in India.
Time limit: Must be furnished on or before the due date of furnishing the return of income under Section 139(1).
• Contents of Form 67:
• Taxpayer identification and assessment year
• Country name, source of income, nature of income
• Foreign tax paid (in foreign currency and INR)
• Proof of payment or deduction of foreign tax
• Self-declaration under Rule 128(9)
• Mode of filing:
Electronic submission via the Income-tax e-Filing Portal (e-File → Income Tax Forms → Form 67), followed by e-verification.
4. Claiming Foreign Tax Credit (FTC):- Computation Rules (Rule 128):
• FTC is allowed in the year in which the income is offered to tax in India.
• Credit is restricted to the lower of:
1. Foreign tax paid, or
2. Indian tax payable on that foreign income.
• Foreign currency must be converted to INR using the SBI Telegraphic Transfer Buying Rate on the last day of the month preceding the month in which the tax was paid/deducted.
Filing Process:
1. Obtain TRC (mandatory for DTAA claims).
2. Collect proof of foreign tax paid (employer certificate, broker statement, foreign tax authority receipt).
3. Prepare Form 67 with details of income and foreign tax paid.
4. Report in ITR:
• Schedule FSI – Foreign Source Income details.
• Schedule TR – Tax Relief claim.
5. Practical Cautions
• Filing Form 67 after ITR can lead to disallowance of FTC (recent judicial and tribunal decisions have stressed strict compliance with Rule 128(9)).
• TRC must be complete — missing particulars like TIN or period of validity can invalidate claims.
• Keep all supporting documentation for 6 years from the end of the relevant assessment year, in case of scrutiny.
Few Cases :- Filing of Form No. 67 is a procedural/directory requirement and is not a mandatory requirement and violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC
Hon'ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, [1992 Supp (1) SupremeCourt Cases 21) in respect of compliance with the procedural requirements have observed that:
"The mere fact that it is statutory does not matter one way of that other. There are conditions and conditions. Some may besubstantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. Itwill be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they wereintended to serve.”
Engineering Analysis Centre of Excellence Private Limited vs the Commissioner of Income-tax & Anr. CivilAppeal Nos. 8733-8734 of 2018 & Ors. Hon'ble Supreme Court have held as under that the provisions of DTAA shall override theprovisions of the Income-tax Act unless they are more beneficial to the assessee:
Wipro Ltd. v. DCIT (TS-610-ITAT-2023) — Delay in filing Form No. 67 condoned; held procedural requirement should not deny substantive FTC benefit.
Brigade Enterprises Ltd. v. DCIT (TS-139-ITAT-2023) — Filing Form No. 67 is mandatory but directory,
Serum Institute of India Ltd. v. ACIT (ITA No. 792/PUN/2013) — TRC is a necessary documentary evidence; without it, DTAA benefit may be restricted.
Bank of India v. ACIT (ITA No. 211/Mum/2013) — TRC not in prescribed form but containing all particulars held acceptable.
CIT vs. G.M. Knitting Industries (P) Ltd. 71 Tuxmann.com 35(SC)
Brinda Ramakrishna us. IPO 193 ITD 840 (Bang)
42 Hertz Software India Pvt. Ltd vs Asst. CIT. Ita No. 29. Hang/2001
Duraiswamy Kumaraswamy vs. PCIT, W.P No.5834 of 2022
Jaspal Singh Bindravs. DCIT in ITA No. 1826/KOL/2024 order dated 19.11.2024:- held as under:
“7. Similar issue arose in the case of Sukhdev Sen Vs. ACIT, Circle -1, Kolkata (ITA No. 78/Kol/2014, dated 26.03.2024). The relevant extractof the aforesaid order is as under:
“7. Before proceeding further, we would like to reproduce rule 128 of the Income-tax Rules, 1962 (the Rules) which relates with foreigntax credit as under:
"Foreign Tax Credit. 128 (1) An assessee, being a resident shall be allowed credit for the amount of any foreign tax paid by himin a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income correspondingto such lax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule:
Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year,credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax orassessed to tax in India"
8. We further note that section 90 of the Act provides that Government of India can enter into Agreement with other countries forgranting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Article 25of DTAA between India and USA provides for credit for foreign taxes. Article 25(2)(a) is relevant in the present context. Same isextracted below:
"Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in theUnited States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income taxpaid in the United States, whether directly or by deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributable to the income which may be taxed in the United States"
9. Thus, Section 90 of the Act read with Article 25(2)(a) of the DTAA provides that tax paid in USA shall be allowed as a credit againstthe tax payable in India but limited to the proportion of Indian tax Neither section 90 nor the DTAA provides that FTC shall bedisallowed for non- compliance with any procedural requirement. Foreign Tax Credit is an assessee's vested right as per Article 25[2](a) of the DNA road wat Section 90 and same cannot be disallowed for non-compliance with procedural requirement that is prescribedin the rules.
10. Further, we would like to mention that rule 128(9) provides that Form No. 67 should be filed on or before the due date of filing thereturn of income as prescribed u/s 139(1) of the Act. However, the rule nowhere provides that if the said Form No. 67 is not filed withinthe required time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. It is therefore evident that if theintention of the legislature were to deny the foreign tax credit, either the Act or the rules would have specifically provided that theforeign tax credit would be disallowed if the assessee does not file Form No. 67 within the due date prescribed under section 139(1) ofthe Act. We further note that Filing of Form No. 67 is a procedural/directory requirement and is not a mandatory requirement andviolation of procedural norm does not extinguish the substantive right of claiming the credit of FTC.
Vikash Daga Vs ACIT Circle-3 (1) Gurgaon ITA No.2536/Del/2022, the ITAT DELHI BENCH 'H', NEW DELHI vide order dated14/06/2023 have held that:
8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assesseeholds a foreign tax credit certificate for Rs. 1887114/- In our considered opinion filing of form 67 is a procedural / directoryrequirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantiveright of claiming the credit of FTC. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of theRules 3 does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory het directory requirement andDTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act.
Ashish Agrawal Vs. Income Tax Officer, Ward-12(1), Hyderabad ITA No. 337/Hyd/2023 ITAT HYDERABADBENCHES "B", have held vide order dated 26/09/2023 that:
“11. As far as the issue of FTC is concerned, learned AR placed reliance on the decision in the case of Ms. Brinda RamaKrishna (supra) in the case of Ms Brinda Rama Krishna (supra), the Bench considered the issue in the light of the provisions ofDTAA, section 295(1) of the Act, the decisions of the Hon'ble Apex Court in the case of Mangalore Chemicals & Fertilizers Ltd.Vs. Deputy Commissioner (1992 Supp (1) SCC 21), Sambhaji Vs. Gangabai (2008) 17 SCC 117 and a lot many decisions ofthe Hon'ble Apex Court including the case in Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) etc. andreached a conclusion that since Rule 128(9) of the Rules does not provide for disallowance of FTC in the case of delay in filingForm 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only directory,since DTAA over rides the Act, and the Rules cannot be contrary to the Act.
6. Conclusion:- In cross-border taxation, TRC establishes eligibility, Form 67 enables procedural compliance, and FTC computation ensures monetary relief. Together, they form the legal triad that protects taxpayers from double taxation. However, the benefits hinge on timely filing, accurate documentation, and strict adherence to statutory rules.
Disclaimer: This article is intended for informational and academic purposes for readers of the tax professional community. It is based on the provisions of the Income-tax Act, 1961, the Income-tax Rules, and relevant CBDT notifications as in force on the date of publication. The content does not constitute legal or professional advice. Readers should consult a qualified tax practitioner for advice on specific facts and circumstances. The author disclaim any liability for actions taken or refrained from based on this publication.
