Foriegn Tax Credit and Form67

Hey Manish, here’s a detailed take on your queries about Foreign Tax Credit (FTC) and Form 67:

1. Tax liability on Canadian income from Oct 2020 to Mar 2021:
   Since you stayed in India for more than 182 days in FY 2020-21, you are a resident Indian for tax purposes and thus your global income (including Canadian salary) is taxable in India. So, yes, you need to disclose and pay tax on your Canadian income in India for that period.

2. Proof required while filing Form 67 for FTC:
   Form 67 is filed to claim relief under the Double Taxation Avoidance Agreement (DTAA). Regarding proofs:

   • Salary slips/pay statements can be submitted as proof of income and tax deducted, but ideally, the Indian tax authorities prefer official tax deduction certificates or statements similar to Form 16/26AS in India.

   • Since Canada’s tax year differs and you don’t have a T4 (equivalent to Form 16), salary slips combined with proof of tax payment (like tax payment receipts, assessment orders, or official documents from Canadian tax authorities) strengthen your claim.

   • If you only have salary slips, it’s still better than nothing but try to get a tax deduction certificate or tax payment proof from Canadian tax authorities for better compliance.

3. Foreign tax refund received after March 2021:
   If you receive a foreign tax refund related to the tax paid in FY 2020-21 but the refund is after the Indian assessment year, the refund amount should be adjusted against the foreign tax paid for computing the foreign tax credit.

   • So effectively, you need to reduce the foreign tax credit claimed by the amount of refund received later, and you may have to revise your ITR or adjust in subsequent years.

Summary:

• Yes, declare Canadian income for FY 20-21 and pay tax in India.

• Attach salary slips and try to get official Canadian tax payment proofs for Form 67.

• Adjust foreign tax refund if it comes later against FTC claimed.

Hi Mani, thanks for your detailed questions! Let me clarify your concerns about Foreign Tax Credit (FTC) and Form 67 under the India-Canada tax scenario.

1. Taxability of Canadian Income in India (FY 2020-21)

Since you stayed in India for more than 182 days in FY 2020-21, you are considered a resident in India for income tax purposes.

• As a resident, your global income is taxable in India, which includes salary earned in Canada from Oct 2020 to March 2021.

• However, since you are also tax resident in Canada (dual residency), Double Tax Avoidance Agreement (DTAA) between India and Canada applies to avoid double taxation.

• So yes, your Canadian salary for the relevant period is taxable in India, but you can claim relief under DTAA.

2. Supporting Documents for Form 67 & FTC Claim

• Form 67 is required to be filed before filing your ITR, to claim relief under DTAA.

• Regarding proofs to attach:

  • Indian tax authorities generally accept salary slips, payslips, or employer wage statements as proof of foreign income if tax deducted is also substantiated.

  • If your Canadian employer does not provide a T4 slip (Canadian equivalent of Form 16) because of different tax year, salary slips/pay statements along with proof of tax paid (like tax payment receipts or tax deduction certificates issued by Canadian tax authorities) can be submitted.

  • If no official tax deducted document is available from Canada, a declaration from employer or tax consultant in Canada about tax deducted/paid may help.

• Bottom line: While salary slips alone may not be the strongest proof, combined with other supporting documents (tax payment receipts, bank statements, employer certificates), it is generally acceptable.

3. Foreign Tax Refund After FY 2020-21

• If you get a foreign tax refund after March 31, 2021, that refund relates to the previous tax paid.

• According to the Income Tax Act and CBDT guidelines, any foreign tax refund that relates to the income for FY 2020-21 should ideally be adjusted against the foreign tax paid while calculating FTC.

• If you receive the refund later (in next FY), you must disclose this refund and adjust the FTC accordingly in the year of receipt or in the relevant assessment year.

• This avoids double benefit of tax credit and refund.

Summary