CBDT amends the income tax rule for Foreign Tax Credit claims

The pre-amended Rule required the FTC claim to be filed by the due date of providing the Income Tax Return. The amendment operates retrospectively so that this benefit can be availed by all FTC claims filed during the current financial year.

In a major relief to taxpayers, the Central Board of Direct Taxes (CBDT) has amended Rule 128 of the Income-tax Rules, 1962 in the matter of claiming Foreign Tax Credit.

“The Statement in Form No. 67 can now be furnished on or before the end of the relevant Assessment Year. Notification No. 100/2022 issued,” according to a Finance Ministry statement.

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The pre-amended Rule required the FTC claim to be filed by the due date of providing the Income Tax Return. The amendment operates retrospectively so that this benefit can be availed by all FTC claims filed during the current financial year.

Calculation of FTC in case of assessee’s with cross-border payments has been a major hassle for tax professionals. The absence of a well-defined set of rules and regulations, combined with few judicial precedents had resulted in diversified practices and complications.

The CBDT had inserted Rule 128 to the Income-tax Rules, 1962 providing rules for grants on the foreign tax credit.

These rules were added to provide much-needed clarity in a domain which operated and was marked with a diversity of interpretations and precedents.

This also aimed to cut the trouble and hassle of claiming credit on taxes paid in foreign countries and help achieve the Government’s vision for a non-adversarial tax regime.