Assessee is India resident receiving foreign social security income from USA. Per Article 20(2) of DTAA, this income is not taxable in India. Previously, in Schedule OS of ITR-2, we would report this income and then claim full exemption under DTAA. However, in the AY26-27 ITR-2 notified form, the DTAA exemption section in Schedule OS is shown as applicable to non-residents only. If instead we try to use FSI/Form 67 for tax credit, it allows only minimum of US Tax and India Tax which means only US tax (25%) for credit but per treaty the full India tax (30%) should be credited. How to resolve?
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AY26-27 ITR-2 problematic change for DTAA income
Replies (3)
Quick Summary
Report the gross US Social Security income under Schedule EI (Exempt Income) under the "Any other exempt income" or "Income exempt under DTAA" field, mentioning the US country code and Article 20.
Raise an official technical grievance on the Income Tax e-filing portal. This is a common early-season schema validation issue that the CBDT usually resolves via a revised software utility update prior to peak filing weeks.
The correct route for a resident claiming DTAA exemption on foreign income is Schedule FSI (Foreign Source Income), not the Schedule OS DTAA column which in the AY 2026-27 form is restricted to non-residents. In Schedule FSI, report the US Social Security amount in the column for income not taxable in India as per treaty - it flows through as treaty-exempt without creating a liability. Form 67 is only for claiming credit on income that IS taxable in India, so it does not apply here.
Before filing, this [AIS pre-filing verification guide](https://taxgarden.in/resources/ais-health-checker-pre-itr-verification-guide-india) helps confirm how the income appears in your AIS so there are no discrepancies when the return is processed.
The online ITR-2 which went live recently does not allow residents to claim DTAA benefit in either Schedule OS or Schedule EI. So, yes, Schedule FSI seems to be the only route. However, FSI does not provide any way to specify income not taxable in India. It only provides for tax relief of the 25% foreign tax (being lower than the 30% India tax). But resident is entitled to the full tax relief under Article 20(2). How to resolve?
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