What is Foreign Tax Credit?

According to the old tax regime, you get he basis exemption limit, for up to: 

• For INR 2.5 lakhs for individuals up to 60 years. 
• INR 3 lakh for a senior citizen who is between the ages of 60-80 years. 
• INR 5 lakhs for the super senior citizens who are above the age of 80 years. 

Follow the steps below to claim the foreign tax credit. 

• First, you need to convert your foreign income into the Indian currency by using the telegraphic transfer buyer rate on the last day of the month when your income is due. 
• You need to arrange your foreign income as relevant income, like salaries, dividends, and interests. If any amount is more than the normal limit under the old regime, and the new regime is taxable according to the income tax rates. 
• Then you need to refer to the DTAA for claiming the TDS deduction in the country. 
• Then you will get a TRC Tax residency certificate, which will help you to clarify your tax residency status which ensuring the application of the DTAA is correct. 
• Now, you need to fill out your Foreign income in the scheduled FSI of the ITR by entering all the details below: 

• Code of the country of source. 
• Taxpayer identification number. 
• The amount of income that you have earned outside India. 
• Tax paid on the foreign income according to the Indian income tax laws. 
• You need to enter the relief tax amount.

Here are the documents that you will need to claim your foreign tax credit by submitting: 

• The foreign country's tax authority. 
• Signature of the assessee. 
• The responsible person for deducting the tax. 
• Form 67 through the Income tax portal. 
• Proof of deduction. 
• Acknowledgement of the online payment. 

Here is the eligibility for claiming a foreign tax credit:

•  Foreign tax credit can be claimed only by a resident assessee. 
• The foreign tax credit is claimed only during the financial year in which your foreign income is taxed. 
• Only a portion of your income is allowed as a tax credit, on which you have paid the tax or is levied.  
• On the money paid as interest, fees, or penalties, you are not entitled to get a foreign tax credit. 
• No disputed income will be considered for a foreign tax credit. 
• Only the taxes that are covered under the DTAA are eligible for the foreign tax credit.