Early ITR filing date, late foreign tax info: How FTC rule and global timeline mismatch hurts ROR taxpayers - what Budget 2026 must fix

A significant challenge remains for individual taxpayers who are classified as Resident and Ordinarily Resident (ROR) and are making some money from overseas. Although Budget 2025 provided some relief by allowing these taxpayers to file ITR-U (also known as updated returns) within 48 months (earlier 24 months) after the end of the relevant assessment year.

The goal here is to promote voluntary compliance and cut down on litigation. However, the deadline for filing revised or belated income tax returns (ITRs) is still December 31 of the assessment year that follows the financial year. This poses a challenge for taxpayers, especially ROR individuals, as they earn foreign income and want to claim the foreign tax credit (FTC) under Sections 90/91.

What is the problem being faced?

Divya Baweja, partner, Deloitte India, said that in countries such as the United States, tax returns for a calendar year (e.g., 2024) are finalised only by April, while the Indian deadline to revise and belated ITRs is December 31. This date mismatch is creating issues for residents and ROR individuals with foreign income.


For example, in the United States, tax returns for a calendar year, e.g., 2024, are finalised only by April 2025, while the Indian deadline to revise returns for FY2023–24 is 31 December 2025.

According to Baweja, this mismatch leads to:

• Provisional FTC estimates, which may later require correction.
• Disputes or refund delays due to inaccurate FTC computation.
• Overpayment of taxes results in large refunds that are often delayed due to verification issues.
• Cash flow disruptions and increased administrative burden for both taxpayers and the tax department.

Chartered Accountant Suresh Surana says that currently, the December 31 deadline for belated and revised returns does not align with the global tax timelines.

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Surana is on the same page with Baweja, noting that Indian ROR taxpayers who need to report foreign income for tax purposes on either an accrual or receipt basis and want to claim Foreign Tax Credit under Sections 90 or 91, face a structural timing mismatch.

Surana says: “Taxpayers are forced to rely on provisional FTC computations, increasing the risk of mismatches, disallowances, and subsequent correspondence with the tax authorities.”

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Surana says that the current framework may lead to excess tax payments, delayed refunds, etc. The expanded 48-month window for filing updated returns does provide a corrective mechanism, but it comes at a cost of additional taxes and interests and does not apply to cases where updating such return leads to a fall in total tax liability or results in refund or increase in refund.

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Surana says that thus giving taxpayers more flexibility either by letting them claim foreign tax credit once the foreign tax return is finalised, or by allowing a simple adjustment later without extra penalty, would enable better aligning with the cross-border taxes.

Surana says: “This would lead to improved accuracy, reduce refund blockages, and lower dispute volumes, all of which are aligned with the government’s broader ease-of-compliance objectives.”

What should Budget 2026 do?

Deloitte recommendation: CBDT should consider the operational challenge faced by such taxpayers who are significant contributors to the tax kitty. The options that could be explored are either extending the deadline for filing revised or belated returns to 31 March of the assessment year following the financial year, or providing an option to such taxpayers to file for an extension, as is the case with other developed economies.

What benefit can this adjustment provide:

• Aligns better with international tax calendars, especially for countries with calendar-year systems.
• Provides a uniform compliance window for taxpayers with global income.
• Reduces the need for multiple amendments or condonation applications.
• Complements the broader compliance framework introduced by the 48-month updated return window, making it a logical and minimal adjustment.

Surana says this timing mismatch (between India revised/belated ITR deadline and foreign countries) often compels taxpayers to claim FTC on a provisional or estimated basis, increasing the potential risk of mismatches with foreign tax records.

Surana says: “Such discrepancies may result in notices, disallowance of credit, delayed refunds, or excess tax payments, thereby creating cash-flow issues and additional compliance burden.”

Surana says that the December 31 deadline, when viewed in the context of cross-border income reporting, does not fully align with international tax timelines and complicates accurate FTC claims for ROR taxpayers.