Query on taking FTC relief on dividends received in January23 to March23

Hi Niraj,

Your question regarding Foreign Tax Credit (FTC) on dividends (especially RSU-linked) and timing of disclosure is a very practical one — let’s address it clearly.

🔍 Situation Summary:

• You received $28.71 in dividend from US company in Feb 2023:

  • $7.18 tax withheld in the US (likely 25% withholding).

  • $21.53 credited to your account.

• Your Form 1042-S for Calendar Year 2022 shows dividend and TDS only till Oct 2022, i.e., does not include Feb 2023 dividend.

• You're unsure in which Assessment Year (AY) to:

  1. Disclose the dividend, and

  2. Claim FTC on the $7.18 US tax withheld.

✅ 1. When to Disclose the Dividend?

You received the dividend in February 2023, i.e., in FY 2022–23 (1 April 2022 to 31 March 2023).

👉 Therefore, it must be reported in:

AY 2023–24 (the return you would file by July 31, 2023 or later with penalty).

Even though your Form 1042-S (which is based on US calendar year) does not cover Feb 2023 dividend, under Indian tax law:

Income is taxable on receipt/accrual basis in the relevant Financial Year.

✅ 2. When and How to Claim FTC on Feb 2023 Withholding?

You can claim FTC in AY 2023–24 for the tax withheld in the US on Feb 2023 dividend, even though it does not appear in Form 1042-S (CY 2022).

✅ What to do instead?

You can support the FTC claim using:

• Dividend credit advice from your broker or demat statement showing:

  • Gross amount ($28.71)

  • Tax withheld ($7.18)

  • Net credited ($21.53)

• Bank statement showing actual credit.

• Broker statement (like TD Ameritrade, Fidelity, etc.) for that quarter.

• If available, the Form 1042-S for CY 2023 (which you’ll receive in 2024) can also be retained as backup in case of assessment.

🔹 Rule Reference:

As per Rule 128 of the Income-tax Rules:

FTC is allowed in the year in which the income is offered to tax in India.

So, since you are offering Feb 2023 dividend in AY 2023–24, you can claim FTC for the US tax withheld, regardless of when Form 1042-S is issued.

✅ Summary:

💡 Tip:

When filing your ITR:

• Disclose dividend under "Income from Other Sources".

• In Schedule TR (FTC), mention the country (USA), income, and tax withheld.

• Attach manual evidence in Form 67 and retain it in case of future scrutiny.

Let me know if you want help with Form 67 or filling Schedule TR in your ITR.