A person who is 'resident and ordinarily resident' (ROR) in India is taxed on global income, including foreign income, while DTAAs and the foreign tax credit prevent the same income being taxed twice. Relief is claimed under Sections 90/91 by filing Form 67, and foreign assets must be disclosed in Schedule FA.
Residential status decides the scope
| Status | Taxable in India |
|---|---|
| Resident and ordinarily resident (ROR) | Global income |
| Resident but not ordinarily resident (RNOR) | Indian income + foreign income from a business controlled in India |
| Non-resident (NR) | Only Indian-source income |
So the first step is always to determine residential status under Section 6, which fixes whether foreign income is taxable at all.
DTAA relief: Sections 90 and 91
Where India has a Double Taxation Avoidance Agreement (Section 90) with the source country, relief is given by the exemption method or, more commonly, the credit method — tax paid abroad is credited against Indian tax on the same income. Where there is no DTAA, unilateral relief under Section 91 applies. The taxpayer can adopt the more beneficial of the Act or the treaty.
Foreign tax credit and Form 67
To claim foreign tax credit (FTC), the taxpayer must file Form 67 with details of foreign income and tax paid, on or before the return due date (filing Form 67 is a procedural requirement; courts have allowed some latitude on timing). The credit is limited to the lower of the foreign tax and the Indian tax on that income.
FEMA and Schedule FA disclosure
- Foreign assets, accounts and beneficial interests must be reported in Schedule FA of the ITR by a resident; non-disclosure carries serious consequences under the Black Money Act.
- Outbound investment and remittances follow FEMA and the LRS framework, with TCS on foreign remittances.
- A Tax Residency Certificate (TRC) from the other country is generally required to claim treaty benefits.
- Coordinate with transfer pricing for cross-border related-party dealings.
Key takeaways
- Residential status (Section 6) decides if foreign income is taxed.
- ROR: global income; RNOR/NR: narrower base.
- DTAA (Section 90) / Section 91 give credit for foreign tax.
- File Form 67 for FTC; disclose foreign assets in Schedule FA.