We are pleased to present the latest edition of Tax Street – our newsletter that covers all the key developments and updates in the realm of taxation in India and across the globe for the month of April 2023.

  • The 'Focus Point' covers an overview of the regulations relating to the FTC claim in India and the related key tax issues.
  • Under the 'From the Judiciary' section, we provide in brief, the key rulings on important cases, and our take on the same.
  • Our 'Tax Talk' provides key updates on the important tax-related news from India and across the globe.
  • Under 'Compliance Calendar', we list down the important due dates with regard to direct tax, transfer pricing and indirect tax in the month.

We hope you find our newsletter useful and we look forward to your feedback.

You can write to us at We would be happy to hear your thoughts on what more can we include in our newsletter and incorporate your feedback in our future editions.

Warm regards,

The Nexdigm Team

Focus Point

Foreign Tax Credit - Overview and related issues

Foreign Tax Credit (FTC) is allowed to a resident of India in respect of the tax paid by him in a source country or specified territory outside India either by way of deduction or otherwise. The overview of the regulations relating to the claim of FTC in India and the related key tax issues are as under:

  • FTC is allowed in respect of tax paid outside India irrespective of whether India has entered into a Double Taxation Avoidance Agreement (DTAA) with such country or specified territories or not. FTC is allowed in the year in which the corresponding income is offered to tax in India.
  • FTC is restricted to the amount of tax payable in India on the corresponding income. FTC can be claimed only against the tax, surcharge and cess payable on the corresponding income in India.
  • For claiming the FTC, the taxpayer is required to file the prescribed form online - Form 67 by the end of the relevant assessment year in which the corresponding income is offered to tax
  • Over the years, there have been various issues relating to the eligibility to claim FTC, the amount that can be claimed as a credit, relating to filing of Form 67, which we have covered in the ensuing paragraphs.

Relief against State Taxes

In certain countries (for example, the USA), income taxes are levied by the State as well as the Central Government. The eligibility to claim FTC for State taxes is a subject matter of dispute.

In the case of Wipro Ltd1 , the Karnataka High Court has held that where DTAA does not cover taxes like state taxes payable on income, FTC can be availed under Section 91 of the ITA. In the case of Tata Sons Ltd2 , the Mumbai Tribunal has held that Section 91 of ITA does not discriminate between State and Federal taxes and, in effect, provides for both types of Income-taxes to be considered for the purpose of tax credits against Indian Income-tax liability.

Hence, the taxpayer is, in principle, entitled to tax credits in respect of the State as well as Central tax payable outside India.

Allowability of FTC where income is exempt from tax in India

Where an income is subject to profit-linked deduction and no tax is payable on the same in India, a question arises whether the taxpayer shall be eligible to claim FTC in respect of such income. Here the language of the DTAA Article on the elimination of double taxation is very important.

In this context, the decision of the Karnataka High Court in the case of Wipro Ltd (supra) is relevant. The taxpayer had claimed a deduction under Section 10A of the ITA and claimed FTC for the taxes paid in USA and Canada. The FTC claim was disputed as to whether the taxpayer is eligible to claim FTC where no tax is paid on the income in India. The Hon'ble High Court relying on the double tax treaty between India and USA, held that the income derived by an Indian resident, which is taxable in the USA (directly or by deductions), would get FTC in India for the entire amount of income tax paid in the USA. The Revenue's appeal against the Karnataka High Court's ruling in Wipro (Supra) has been granted a Special Leave for Appeal3, leaving the decision of the High Court to be adjudicated upon by the Supreme Court.

It will be interesting to see how the Apex Court interprets India-USA DTAA.


1. [2015] 62 26, [2016] 382 ITR 179

2. [2011] 10 87 (Mum.)

3. [2018] 95 107 (SC)

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.