I-T department notifies rules for foreign tax credit
July, 01st 2016
The income-tax department has notified the rules for foreign tax credit, providing clarity on tax credit available to Indian resident taxpayers on foreign income that has been subject to tax outside the country. The new rules will come into force from April 1, 2017.
"An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the Income Tax Act but not in respect of any sum payable by way of interest, fee or penalty.
The Central Board of Direct Taxes had issued draft rules in April. The final rules have been notified after feedback, incorporating some of the key suggestions. The CBDT has allowed self-certified documents in lieu of a certificate from the tax authority of a foreign country, making it easier for assessees to claim credit for tax paid outside India.
The rules now eliminate grey areas such as FTC (foreign tax credit) on disputed foreign tax liability and also make it easier for the taxpayer to comply with the documentation requirements," said Rakesh Nangia, managing partner, Nangia & Co Credit will also be available against the minimum alternate tax or MAT levied under section 115JB. Taxpayers claiming foreign tax credit will have to file a statement of income from a foreign country in Form 67.