Outlook Business Desk
Bollywood superstar Shah Rukh Khan wins as the Income Tax Appellate Tribunal (ITAT) ruled in his favor, dismissing reassessment proceedings for the 2011-12 financial year. Tax experts believe this ruling strengthens protections for Indian taxpayers with overseas income.
Shah Rukh Khan’s tax dispute involved his earnings from his 2011 movie 'Ra. One', media reports stated. The tax officer disputed Khan’s declared income of Rs 83.42 crore for the 2012-13 assessment year, rejecting his claim for a Foreign Tax Credit (FTC) on taxes paid in the UK. The officer reassessed his income at a higher amount of Rs 84.17 crore, over 4 years later.
A Foreign Tax Credit (FTC) enables taxpayers to deduct taxes paid abroad from their Indian tax liability. Foreign citizens and resident aliens who pay income taxes imposed by a foreign country can claim the credit. The credit can reduce your tax liability and help ensure you aren't taxed twice on the same income.
To claim FTC, taxpayers should keep Form 67, proof of foreign tax payments, Tax Deducted at Source (TDS) certificates, Income Tax Return (ITR) copies, pay slips, and a Tax Residency Certificate (TRC) to validate Double Taxation Avoidance Agreement (DTAA) applicability.
The Central Board of Direct Taxes (CBDT) mandates filing Form 67 online before submitting the ITR to claim an FTC, requiring Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). The form includes four sections: Part A (basic details, income, tax credit claims), Part B (refunds/disputed foreign tax), Verification (self-declaration under Rule 128), and Attachments (proof of foreign tax payment or deduction).
This rule governs the FTC, allowing Indian residents to claim credit for taxes paid abroad. It applies in the year the income is taxed in India and is adjusted if spread across multiple years. FTC excludes penalties or interest but can be claimed after resolving disputes. It is calculated separately for each income source and limited to the lower of Indian or foreign tax paid.
To avail tax treaty benefits, non-residents must secure a Tax Residency Certificate (TRC) from their home country. Additionally, an individual's residential status in India determines the taxation of their global income.
An individual is classified as a resident Indian if they have stayed in India for at least 182 days in a financial year or have spent 60 days in the previous financial year along with 365 days or more in the last four years.