Foreign salary, double tax? When late filing of Form 67 can deny DTAA benefits to Indians

Many Indians working overseas and earning their pay abroad must settle their due taxes in that foreign country, whether it is Singapore, or the United States of America (USA). Currently, the United Arab Emirates (UAE) has no personal income tax. Therefore, for salaried employees who have already paid taxes in foreign countries, India allows foreign tax credit. To take advantage of this, you need to file Form 67 in accordance with Rule 128 of the Income Tax Rules, 1962.

Although you need to file Form 67 before the income tax return (ITR) filing deadline to receive the foreign tax credit (FTC), missing this deadline can lead to tax disputes. Some taxpayers have successfully contested these disputes in ITAT, but it's best to file Form 67 within the due date and get the FTC credit in India to avoid double taxation.

Also read: Big win for NRI taxpayer: ITAT Chennai rules US-based individual qualifies as non-resident, no tax in India on overseas earnings

Recent ITAT Delhi case about Form 67 FTC denial

On December 10, 2025, ITAT Delhi allowed foreign tax credit benefit to an assessee even though Form 67 was filed belatedly.

In this case (ITA No. 3029/DEL/2024), the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) dealt with two principal issues:

1. Addition of alleged unexplained foreign investments made in the names of the assessee’s (Mr. Singh) minor daughters under Section 69, and
2. Denial of foreign tax credit (FTC) under Sections 90/91 on the ground that Form No. 67 was not filed within the prescribed time.

The assessee (Mr. Singh), a high-net-worth individual, had filed his return declaring taxable income of approximately Rs. 26.80 crore, which included income clubbed from his minor daughters under Section 64(1A). The Assessing Officer had denied foreign tax credit (FTC) of about Rs 23.03 lakh for taxes paid in Singapore, invoking Rule 128 on the premise that Form No. 67 was not filed within due date.

On appeal, the CIT(A) deleted both the additions, and Revenue (income tax department) took the case to the ITAT.

With respect to foreign tax credit, the ITAT observed that the assessee had included the foreign salary income in his Indian return, furnished complete details in Schedules FSI and TR, and filed Form No. 67 as well as a revised return within the time permitted under Section 139(4) of the IT Act.

The ITAT agreed with the CIT(A) that procedural requirements under Rule 128 should not result in denial of substantive relief where the conditions for avoiding double taxation are otherwise satisfied. Emphasising the principle that the same income cannot be taxed twice, the ITAT directed the Assessing Officer to allow relief under Sections 90/91 and dismissed the Income Tax Department’s appeal in entirety.

Also read: NRI woman earns Rs 1.35 crore from mutual funds, pays zero tax in India, gets income tax notice: How India-Singapore DTAA saved her

What is the deadline to file Form 67?

Chartered Accountant Gaurav Makhijani said to ET Wealth Online: "As per the Indian tax rules, Form 67 must be filed by the end of the relevant assessment year i.e., for income earned in FY 2024–25, Form 67 can be filed on or before 31 March 2026 in order to claim Foreign Tax Credit."

Makhijani says that the income-tax return claiming FTC must still be filed within the prescribed time limits. For instances, if tax return if not yet filed for FY 2024-25, it must be furnished by December 31st as belated tax return under Section 139(4) in order to claim Foreign Tax Credit along with Form 67 that may be furnished on or before 31 March 2026.

Makhijani says: "In practice, it is advisable to file Form 67 before filing the tax return, as this helps avoid automatic tax demands during return processing. The extended timeline mainly helps taxpayers in cases where documents such as proof of foreign tax payment are not immediately available."

Can an Indian who earned salary and other income from UAE, Singapore, USA claim double taxation benefit by filing Form 67?

According to Makhijani, an Indian resident can claim double taxation relief by disclosing relevant particulars in Tax Return Form. One must also file a separate Form 67 within prescribed timeline along with relevant proof of tax payments to substantiate that foreign tax has actually been paid.

Makhijani says: "Under the India domestic tax law, foreign tax credit for taxes paid overseas will be limited to the Indian tax on such income or foreign tax paid, whichever is lower."

What happens if Form 67 is not filed?

Makhijani says that the Foreign Tax Credit (FTC) will be denied in case Form 67 is not filed which will lead to double taxation. Courts in few cases have held that Form 67 is a procedural requirement and delay or even non-filing should not automatically deny the FTC where all the conditions for claiming FTC are satisfied.

Makhijani says: "Having said this, this depends on facts and background and could involve high litigation cost. Recommendation is to file Form 67 well in advance, preferably before filing tax return."

What does this judgement mean for other taxpayers?

According to Chartered Accountant Suresh Surana, the aforementioned judgment is significant for individual taxpayers, particularly high-net-worth individuals, as it reinforces the principle that substantive tax relief cannot be denied on the basis of procedural or technical lapses when material compliance is evident.

According to Surana, the Delhi ITAT has clarified that where foreign income is duly offered to tax in India, relevant disclosures are made in the return of income, and Form No. 67 along with a revised return is filed, the claim for foreign tax credit under Sections 90/91 should not be rejected merely on technical grounds.

Surana says: “This provides comfort to taxpayers that genuine claims for relief from double taxation will be protected, provided they act within the extended statutory timelines.”

However, Surana cautions that irrespective of the favourable ruling, taxpayers should continue to ensure that their return of income are filed within the prescribed due dates and that Form No. 67 is furnished within the timelines stipulated under Rule 128, and should not rely on judicial relief as a substitute for timely compliance.

Surana says: “It is pertinent to note that though the decision offers interpretative clarity, it does not override or relax the statutory obligation to comply with the procedural requirements.”

The ruling also highlights the evidentiary value of proper disclosure in statutory schedules, such as Schedule FA, FSI and TR, and the relevance of demonstrating the availability of sufficient disclosed sources of income.

According to Surana, the Tribunal’s approach makes it clear that once foreign assets and investments are transparently reported and supported by bank records, additions on account of unexplained investments cannot be sustained merely on suspicion.