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Rule 76Published

Rule 76: Foreign tax credit calculation and forms

Rule 76 governs credit for qualifying foreign income-tax paid by an Indian resident. It matches the foreign tax to income taxed in India, limits the credit and specifies evidence, forms and filing periods.

Official notified Income-tax Rules, 2026

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Rule 76 - Foreign tax credit

(1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the tax year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule.

(2) In a case, where income on which foreign tax has been paid or deducted, is offered to tax in more than one tax year, credit of foreign tax shall be allowed across those tax years in the same proportion in which the income is offered to tax or assessed to tax in India.

(3) The foreign tax referred to in sub-rule (1) shall mean, — (a) in respect of a country or specified territory outside India with which India has entered into an agreement for the relief or avoidance of double taxation of income in terms of section 159, the tax covered under the said agreement; (b) in respect of any other country or specified territory outside India, the tax payable under the law in force in that country or specified territory in the nature of income-tax referred to in section 160(3)(a).

(4) The credit under sub-rule (1) shall be available against the amount of tax, surcharge and cess payable under the Act, but not in respect of any sum payable by way of interest, fee or penalty.

(5) No credit under sub-rule (1) shall be available in respect of any amount of foreign tax or part thereof, which is disputed in any manner by the assessee, subject to the provisions of sub-rule (6).

(6) If the assessee, within six months from the end of the month in which the dispute is finally settled, furnishes evidence of settlement of dispute and an evidence to the effect that the liability for payment of such foreign tax has been discharged by him and furnishes an undertaking that no refund in respect of such amount has directly or indirectly been claimed or shall be claimed, the credit of such disputed tax shall be allowed for the year in which such income is offered to tax or assessed to tax in India.

(7) The credit of foreign tax shall be the aggregate of the amounts of credit computed separately for each source of income arising from a particular country or specified territory outside India and shall be given effect to in the following manner: — (a) the credit shall be the lower of the tax payable under the Act on such income and the foreign tax paid on such income, so, however, that where the foreign tax paid exceeds the amount of tax payable in accordance with the provisions of the agreement for relief or avoidance of double taxation, such excess shall be ignored; (b) the credit shall be determined by conversion of the currency of payment of foreign tax at the telegraphic transfer buying rate on the last day of the month immediately preceding the month in which such tax has been paid or deducted.

(8) In a case where any tax is payable under the provisions of section 206, the credit of foreign tax shall be allowed against such tax in the same manner as is allowable against any tax payable under the provisions of the Act other than the provisions of the said sections (herein referred to as the normal provisions).

(9) Where the amount of foreign tax credit available against the tax payable under the provisions of section 206 exceeds the amount of tax credit available against the normal provisions, then, while computing the amount of credit under section 206(1)(m) to (p) and section 206(2)(e) to (h), in respect of the taxes paid under section 206(1) and (2), as the case may be, such excess shall be ignored.

(10) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee: — (a) a statement of income from the country or specified territory outside India offered for tax for the tax year and of foreign tax deducted or paid on such income in Form No. 44 and verified in the manner specified therein; and (b) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee, — (i) from the tax authority of the country or specified territory outside India; or (ii) from the person responsible for deduction of such tax; or (iii) signed by the assessee.

(11) The certificate or statement furnished by the assessee in sub-rule (10)(b) shall be valid, if it is accompanied by — (a) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee; or (b) proof of deduction, where the tax has been deducted.

(12) The statement in Form No. 44 referred to in sub-rule (10)(a) and the certificate or the statement referred to in sub-rule (10)(b) shall be furnished within twelve months from the end of the relevant tax year in which the income referred to in sub-rule (1) has been offered to tax or assessed to tax in India and the return for such tax year has been furnished within the time specified under section 263(1) or (4), subject to the provisions of sub-rule (13).

(13) Where the return has been furnished under section 263(6)(a), the statement in Form No. 44 referred to in sub-rule (10)(a) and the certificate or the statement referred to in sub-rule (10)(b), to the extent it relates to the income included in the updated return, shall be furnished on or before the date on which such return is furnished.

(14) Form No. 44 shall also be furnished in a case, where the carry backward of loss of the current year or revision of return or similar statement, the case may be, of any year or any other reason results in refund of foreign tax for which credit has been claimed in any tax year or tax years.

(15) For the purposes of sub-rule (6), the assessee shall furnish an intimation in Form No. 45 and evidence of settlement of dispute including evidence of payment of tax.

(16) Form No. 44 shall be verified by an accountant defined in section 515(3)(b), — (a) where the assessee is a company; or (b) in all other cases, where the amount of foreign tax paid outside India for a tax year equals or exceeds ₹ 100000.

(17) Form No. 45 shall be verified by an accountant defined in section 515(3)(b) in a case, where Form No. 44 filed for the relevant tax year was required to be verified by an accountant under sub-rule (16).

(18) For the purposes of this rule, the expression ―telegraphic transfer buying rate‖ shall have the meaning assigned to it in rule 207.

Rule breakdown

Match eligible foreign tax to income taxed in India

The rule applies to a resident and the qualifying foreign tax defined by reference to the applicable treaty or the stated non-treaty income-tax category. Credit is linked to the year the corresponding income is offered or assessed to tax in India.

If that income is spread over more than one Indian tax year, the credit is allocated in the same proportions. Keep the income and foreign-tax records linked rather than claiming the entire credit in an unrelated year.

Apply the source-by-country limit

Compute credit separately for each source of income in each country or specified territory. The credit is the lower of Indian tax on that income and qualifying foreign tax, ignoring any foreign-tax amount exceeding what the treaty permits.

Hypothetical: Indian tax on a source is ₹20,000 and qualifying foreign tax is ₹15,000. The limit is ₹15,000. If qualifying foreign tax were ₹25,000, the limit would be ₹20,000, subject to all other conditions.

Use the correct conversion date and tax components

Convert the foreign-tax payment using the telegraphic transfer buying rate on the last day of the month immediately preceding its payment or deduction month. The rule assigns that expression its meaning by reference to Rule 207.

Credit may offset tax, surcharge and cess, but not interest, fees or penalties. Do not use the income-receipt exchange rate automatically for the foreign-tax conversion.

Handle disputed tax through the separate process

Disputed foreign tax is ordinarily not available for credit. After final settlement, the rule permits the specified credit if evidence of settlement and payment and the no-refund undertaking are furnished within six months from the end of the settlement month.

Form No. 45 is the prescribed intimation with settlement and payment evidence. The resulting credit relates to the year in which the corresponding income was offered or assessed in India, not automatically the settlement year.

Furnish Form 44 and tax-payment evidence

Form No. 44 reports the foreign income offered for tax and foreign tax paid or deducted. The accompanying certificate or statement may come from the foreign tax authority, the deductor or the assessee, subject to the stated evidence requirements.

Keep the online-payment acknowledgment, bank counterfoil or challan for tax paid by the assessee, or proof of deduction where tax was withheld.

Check the ordinary and updated-return periods

The ordinary document period is within twelve months from the end of the relevant tax year, with the return furnished within the section 263(1) or (4) time specified in the rule. For income included in an updated return under section 263(6)(a), the documents must be furnished on or before that return’s filing date.

Do not use the ordinary period to postpone the documents required with an updated-return claim. Check the current Act and official filing instructions for the actual return category.

Accountant verification and later refunds

Form 44 must be verified by the defined accountant for a company, and in other cases where foreign tax paid outside India for the year is at least ₹1 lakh. Form 45 needs accountant verification where the relevant Form 44 required it.

Form 44 must also be furnished when a loss carry-back, return revision or other reason results in refund of foreign tax for which credit was claimed. Track later foreign adjustments rather than leaving the Indian credit record unchanged.

Section 206 interactions and practical file

Sub-rules (8) and (9) address foreign credit against section 206 tax and the treatment of excess credit for the linked tax-credit calculation. Apply them with the current section 206 provisions and the taxpayer’s actual tax basis.

Retain source-by-country computations, Indian return inclusion, treaty limits, conversion evidence, tax certificates, payment proofs, forms and any later dispute or refund records.

Key takeaways

Match income and credit

Use the year and proportion in which the income is taxed in India.

Lower-of limit

Compute separately by source and country, with the treaty ceiling.

Forms 44 and 45

Ordinary credit and dispute-settlement reporting have distinct requirements.

Verification thresholds

Companies always require the stated accountant verification; other cases use the ₹1 lakh threshold.

Practical checklist

  • Prepare source-by-country matching and limit computations.
  • Use the prescribed foreign-tax conversion date.
  • Retain payment or deduction evidence and file the required forms.
  • Track later disputes, refunds and verification requirements.

Avoid

  • Do not offset credit against interest, fees or penalties.
  • Do not ignore treaty limits or later foreign-tax refunds.

FAQs

Can foreign tax credit offset a late-filing fee or interest?

No. The rule permits credit against tax, surcharge and cess, not interest, fees or penalties.

Can all foreign income and tax be pooled into one limit?

The rule requires separate computation for each source in each country or specified territory.

When must an updated-return credit statement be furnished?

For the relevant updated-return income, on or before the date that return is furnished.

Does a non-company need accountant verification for exactly ₹1 lakh foreign tax?

Yes. The condition is foreign tax equal to or exceeding ₹1 lakh.

Can disputed tax be claimed without settlement evidence?

The ordinary exclusion applies unless the conditions and documents in the dispute-settlement provisions are satisfied.

Glossary

Form 44
The prescribed statement of foreign income and foreign tax, also used for the stated refund reporting.
Form 45
The prescribed dispute-settlement intimation with evidence.
Source-by-country limit
The separate credit comparison for each income source in each country or specified territory.

Official sources