US tax credit denied for not filing Form 67

Prashant Maharishi, Vice-President along with Sandeep Singh Karhail, a Judicial Member of ITAT Bangalore, recently ruled that mere delay in filing Form No. 67 under Income Tax Rule 128(9) won’t stop someone from claiming the benefit of foreign tax credit (FTC) for taxes paid abroad, specifically in the USA.

This judgement was given in a case involving Mr Shekhar from Dombivali, Kalyan, who received an income tax notice from the Income Tax Officer, Bangalore, which denied him India credit for the taxes paid in the USA.

Mr Shekhar, an Indian citizen, has income sources in both India and the USA. He earned Rs 8.98 lakh (Rs 9 lakh) in the USA for which he paid Rs 1.79 lakh in taxes there. He reported the same income in his income tax return (ITR) and claimed Rs 1.64 lakh foreign tax credit (FTC) for the Rs 1.79 lakh tax paid in the USA, opting for a lower amount than what he actually paid.

However, when his ITR was processed by the CPC (Bengaluru), on March 6, 2019, he was issued a Section 143(1) tax notice denying the FTC credit claimed by him. So Shekhar filed a revised ITR, but once again his US tax credit was rejected. Feeling aggrieved, he filed an appeal before the Addl./Joint CIT(A). However, the appeal was dismissed. So he appealed to ITAT Bangalore.

On August 17, 2026, ITAT Bangalore allowed his appeal for statistical reasons.

Also read: Rs 14.42 lakh Belgium salary of IT pro triggered tax demand in India after Form 67 was missed; ITAT Bangalore gives relief

Summary of the judgement

Chartered Accountant Suresh Surana said to ET Wealth Online that in this case, ITAT Bangalore held that a delay in filing Form 67, being procedural in nature, should not by itself deprive a taxpayer of an otherwise legitimate FTC.

Surana says: “However, the ITAT Bangalore did not finally allow the FTC of Rs.1,64,427; it restored the matter to the jurisdictional Assessing Officer (“AO”) for verification and decision on merits.”

According to Surana, Shekhar needed this foreign tax credit in India as he was an Indian resident who had earned income both in India and the USA during AY 2017-18.

To avoid double taxation of the same income, Shekhar claimed FTC of Rs 1.64 lakh under Section 90, read with the applicable India-USA DTAA treaty provisions.

ITAT Bangalore observed that Shekhar had actually paid taxes on the income earned outside India and the corresponding income had been offered to tax in India as well. Moreover, Shekhar’s Form 67 and the US Form W-2 as proof of payment of taxes abroad were already available on record.

Surana says: “The tax dispute was therefore essentially whether the delay in furnishing Form 67 was sufficient, by itself, to extinguish Shekhar's claim for tax paid in US.”

Also read: US citizen received Rs 30 lakh income tax demand notice in India, was denied India-US DTAA relief due to a mistake: Know how she won at ITAT Delhi

Surana says that ITAT Bangalore decided the issue in favour of Shekhar and relied on earlier judicial precedents, including the case of Sonakshi Sinha v. CIT, and noted that Rule 128(9), as applicable to the relevant year, prescribed a timeline for filing Form 67 but did not expressly say that FTC would be forfeited merely because the form was filed late.

According to Surana, Shekhar succeeded on the important legal issue because ITAT Bangalore distinguished between the substantive entitlement to FTC and the procedural requirement of filing Form 67 within the prescribed time.

Since the foreign income had been subjected to tax in India and tax had also been paid overseas, the claim involved relief against double taxation.

According to Surana, in the ITAT Bangalore’s view, mere delay in furnishing the prescribed form could not automatically extinguish that substantive claim, particularly when the supporting Form 67 and foreign-tax documents were subsequently available for verification.

Thus, procedural non-compliance may not ordinarily defeat a substantive tax benefit unless the governing legislation clearly prescribes such a consequence.

Surana says: “The ITAT Bangalore accordingly held that the delay in filing Form 67 did not, on its own, preclude the taxpayer from claiming FTC.”

It is important to point out that the ITAT did not direct that Rs 1,64,427 be granted automatically. Since the lower authorities had rejected the claim on technical grounds without examining its merits, the Tribunal sent the matter back to the jurisdictional AO.

The AO must now accept Form 67 and the supporting documents on record and examine the taxpayer's FTC entitlement on merits, including the amount of foreign tax eligible for credit. Shekhar must also be given a reasonable opportunity of being heard before a fresh decision is taken. The appeal was therefore technically “allowed for statistical purposes.”

Also read: Employee wrongly declared Rs 14 lakh Australian salary in Indian ITR: ITAT grants tax relief but denies Rs 3.4 lakh foreign tax credit

When do we need to file Form 67?

An Indian resident taxpayer claiming Foreign Tax Credit for tax paid or deducted outside India must furnish Form 67 along with the prescribed evidence of foreign income and tax payment. According to the Income Tax Act, 2025, applicable from April 1, 2026, and the Income-tax Rules, 2026, Form 44 is the successor to Form 67 for FTC claims governed by the new framework.

Surana says: “Form 44 must be filed within 12 months from the end of the tax year in which the foreign income is offered to tax in India.”

Surana says that although the amended tax rule permits filing up to the end of the assessment year, it is recommendable to furnish Form 67 (Form 44) before or along with the income tax return (ITR) to minimise the possibility of the FTC being denied during ITR processing.

Here’s a chart to better understand the timelines:

Source: CA Suresh Surana