Form 67 to Form 44 transition: foreign tax credit for AY 2026-27

If you hold US stocks, RSUs or ETFs as an Indian resident, the foreign tax credit (FTC) is the single most valuable line item in your tax filing. It is also the one with the most procedural traps. AY 2026-27 is a transitional year: Form 67 is still the operative form for returns filed in 2026, but the new Income-tax Act, 2025 will replace it with Form 44 from the next tax year onwards. This guide walks through exactly what to do, when, and how the handover works.

TL;DR

For income earned in FY 2025-26 (AY 2026-27), you file Form 67 as you always have — before or with your ITR, by 31 July 2026 to be safe, and no later than 31 March 2027 to remain within Rule 128(9). The Income-tax Act, 2025 takes effect from 1 April 2026, and its replacement form — Form 44 — applies from Tax Year 2026-27, which you will report in 2027. Mechanics, lower-of cap, surcharge-and-cess inclusion, and DTAA linkage are broadly preserved. CA certification is expected to become mandatory in more cases under the new form.

What Form 67 (and Form 44) is for

The right to claim relief from double taxation flows from Article 25 of the India-US DTAA (and the equivalent article in every other Indian treaty), implemented domestically through Section 90 of the Income-tax Act, 1961 (and Section 159 of the Income-tax Act, 2025 for the new regime). The procedural plumbing — what to file, when, with which attachments — sits in Rule 128 of the Income-tax Rules, 1962, and corresponds to Rule 76 of the draft Income-tax Rules, 2026 under the new Act.

Form 67 is the statement you make to the Income-tax Department that says, in effect: I am a resident of India, I earned this much income outside India, this much foreign tax was paid on it, here are the source documents, and please credit the foreign tax against my Indian tax liability for the same income. The form is electronic, filed through the e-filing portal under your login, and has been so since AY 2017-18.

Form 44 is the new name for that same statement under the Income-tax Act, 2025. The form has been redesigned into three parts and now also captures situations where carry-back of losses, revision of return or refund of foreign tax requires you to intimate the Department — those events did not have a clean form earlier and were a frequent source of disputes.

The three layers you must satisfy

1. Treaty layer: the relevant DTAA article (Article 25 in the case of India-US) gives you the substantive right.
2. Domestic statute layer: Section 90 (old Act) or Section 159 (new Act) translates the treaty right into Indian law.
3. Procedural layer: Rule 128 (and Form 67) — or Rule 76 (and Form 44) — sets the documentation and timing.

Miss the third layer and the substantive right may still be defensible at the tribunal stage, but you will spend years getting there.

Why this matters for Indian RSU holders and US-stock investors

Every quarterly dividend from a US company you hold — directly or through an Indian broker that routes via a US partner — arrives in your account net of 25% US withholding tax, assuming your W-8BEN is on file. Without W-8BEN the rate jumps to 30%. The 25% slice is not lost: it is a foreign tax paid that India is obliged to credit against your Indian tax on that same dividend.

For someone in the 30% Indian slab, the math without FTC is brutal. A $1,000 dividend becomes $750 in your hand after US withholding, and then India adds tax of roughly $300 on the gross $1,000, leaving you with $450 — an effective rate of 55 percent. With FTC done properly, the $250 already paid in the US wipes out most of the Indian tax on that income, and you end up roughly where the higher of the two rates would have landed you. That is the entire point of the DTAA.

RSU dividends are the most overlooked category. Many employees treat RSUs as a single event at vest, ignore the dividends that came in over the holding period, and only remember when they reconcile their 1042-S against their broker statement. Each of those dividends carries a credit. The credit is worth claiming.

LRS-funded direct US-stock purchases are the second category — anyone who used the LRS route to buy US stocks and held them through a dividend will see US WHT and needs to file Form 67 / Form 44.

Mechanical walkthrough: when, what, who

When to file

The current Rule 128(9), as amended by CBDT Notification 100/2022 with retrospective effect from 1 April 2022, lays out three windows:

• Original return: Form 67 must be filed on or before the end of the assessment year — i.e., by 31 March 2027 for AY 2026-27.
• Belated return under section 139(4): Form 67 must be filed on or before the end of the assessment year (same deadline as above, 31 March 2027).
• Updated return under section 139(8A): Form 67 must be filed on or before the due date of the updated return itself.

The cleanest practice is still to file Form 67 before or together with your ITR-2 on 31 July 2026, because that lets the CPC reconcile your Schedule FSI, Schedule TR and Form 67 numbers in a single pass and reduces the risk of an automated mismatch notice.

For Form 44, the draft Rule 76 framework provides that the form must be furnished within 12 months from the end of the relevant tax year in which the foreign income was offered to tax in India, provided the return for that tax year was filed within the specified timelines. We treat this as directional until the rules are finally notified.

What to attach

Rule 128(8) requires three things alongside Form 67:

1. Statement of income from the foreign country / specified territory and of the foreign tax paid on it, signed by the assessee.
2. Proof of payment of foreign tax: either a certificate from the foreign tax authority, or a certificate from the person responsible for deducting the tax, or a signed statement from the assessee accompanied by an acknowledgement of online payment or bank counterfoil or challan for tax payment.
3. Copy of the DTAA, where credit is claimed under the treaty route (this is largely a formality since the DTAA is in the public domain, but the form requires you to reference it).

For US dividends, item 2 is satisfied by your Form 1042-S from the US payer or broker, which shows the gross dividend, the withholding rate and the tax withheld. Keep it. If the dividend went through a custodian (Indian broker → US partner like Vested, INDmoney, IndStocks), the consolidated statement and 1042-S together do the job.

Who must file

Any resident of India who has earned income that has been taxed (or assessed to tax) outside India, and who wants the foreign tax credit, must file. The form is filed by the assessee personally — there is no concept of a TDS return or third-party filing here. Non-residents do not file Form 67 because they do not get FTC under Section 90 for income earned outside India in the first place.

Under the proposed Form 44 framework, an accountant's certification is expected to be mandatory for companies (regardless of amount) and for non-company assessees where the foreign tax paid exceeds rupees one lakh in the tax year. The threshold-based CA verification is broadly consistent with the existing practice but tightens the rule for corporates.

Worked example: $1,000 in Microsoft dividends, 30 percent slab

Let us walk through a clean example that mirrors what an RSU-holding tech employee in Bengaluru would see.

Facts

• Resident Indian individual, 30 percent slab including 4 percent cess (effective 31.2 percent).
• Owns 200 shares of Microsoft acquired through ESPP and a vested RSU grant. Holds them at Charles Schwab / E*TRADE.
• FY 2025-26 dividends declared on MSFT: roughly $1,000 gross across four quarterly payments.
• W-8BEN on file. US withholds at 25 percent on each payment.
• USD/INR average for the year: 86.50.

Step 1 — Translate to INR

Gross US dividend: $1,000 × 86.50 = INR 86,500. US tax withheld: $250 × 86.50 = INR 21,625.

Use the SBI TT buying rate on the last day of the month preceding the month of receipt — that is the convention Rule 115 and the Form 67 utility expect.

Step 2 — Add it to Indian taxable income

The gross of INR 86,500 goes into Income from Other Sources in your ITR-2. It also goes into Schedule FSI with country code US (USA, country code 2). You report the same INR 86,500 there and the foreign tax of INR 21,625.

Step 3 — Compute the lower-of cap

The credit allowed equals the lower of:

• foreign tax actually paid on the income: INR 21,625, and
• Indian tax that would otherwise be payable on that same income at your effective rate.

At 31.2 percent (30 percent slab plus 4 percent cess), Indian tax on INR 86,500 = INR 26,988. The lower of 21,625 and 26,988 is INR 21,625.

Step 4 — Schedule TR and Form 67

In Schedule TR you enter the country (US), the tax identification, the tax payable in India on the doubly taxed income (INR 26,988), the tax paid outside India (INR 21,625), and the relief claimed under Section 90 — which equals the lower number, INR 21,625.

In Form 67 you mirror the same: country, income head (Other Sources), gross income (INR 86,500), foreign tax (INR 21,625), DTAA article (Article 25 of India-US DTAA), and the relief claimed.

Step 5 — Net Indian tax on the dividend

Gross Indian tax on the dividend: INR 26,988. Less FTC: INR 21,625. Net Indian tax on the dividend: INR 5,363 (the top-up between 25 percent US WHT and the 31.2 percent Indian effective rate).

If you had skipped Form 67 entirely, you would have paid the entire INR 26,988 in India on top of the INR 21,625 already withheld in the US — a total of INR 48,613 on an INR 86,500 dividend, an effective rate of 56 percent. Form 67 is worth INR 21,625 to this taxpayer in this year alone.

What changed (and what did not) in the transition

The transition from Form 67 (Income-tax Act, 1961, Rule 128) to Form 44 (Income-tax Act, 2025, draft Rule 76) is not a substantive rewrite. The pillars are preserved:

• DTAA primacy — credit is claimed under the treaty where one exists, otherwise under Section 90A / equivalent unilateral relief.
• Lower-of cap — the credit remains capped at the lower of foreign tax paid and Indian tax attributable to the foreign income.
• Per-country, per-source aggregation — credit is computed source-wise and country-wise, then summed.
• No credit against interest, fee, or penalty — the credit operates only against tax, surcharge and cess.
• No credit for disputed foreign tax — if the foreign tax is under dispute, you cannot claim credit until the dispute is resolved.

What is genuinely new under Form 44, based on the draft rules and the published draft form:

• A consolidated three-part structure that captures (a) details of foreign income and foreign tax, (b) details of any carry-back of losses or revisions affecting earlier FTC claims, and (c) computation of credit by country and source.
• An explicit reporting box for situations where foreign tax originally credited has subsequently been refunded by the foreign jurisdiction — you must intimate the Department.
• Mandatory CA verification in more cases (companies always; individuals where foreign tax paid is rupees one lakh or more).
• Direct integration of the FTC computation into the ITR utility for the tax year, reducing the separate-form-and-schedule double entry that has caused so many CPC mismatches.

The deadline architecture also tightens slightly. Under Form 67, the amended Rule 128(9) effectively gave you until the end of the assessment year (and for updated returns, until the updated-return deadline). Under draft Rule 76 for Form 44, the operative window is 12 months from the end of the relevant tax year, conditional on the return being filed within the specified timelines. The practical effect is similar for most taxpayers, but the trigger date language differs.

Common mistakes that destroy the credit

Filing Form 67 after the ITR has been processed without intimating it. Even with the directory-not-mandatory ITAT case law, the CPC will simply disallow your FTC and raise a demand. You then end up at tribunal arguing principle when you could have filed on time.

Mismatched numbers between Form 67, Schedule FSI and Schedule TR. A common error is using the SBI TT rate on one date for Form 67 and the average rate for Schedule TR. The CPC matches these line by line — if the foreign tax number in Form 67 is INR 21,625 and in Schedule TR it is INR 21,400, expect a notice.

Missing the source document. Form 1042-S is the gold standard for US dividends. Brokerage statements alone are usually accepted but if the assessing officer asks, you need the 1042-S. Download it from your broker's tax portal in mid-February each year.

Claiming credit in the wrong year. The FTC year is the year in which the foreign income is offered to tax in India, not the year the foreign tax was paid. For US dividends those are usually the same calendar period, but for income with timing differences (e.g., RSU vests where US tax and Indian tax accrue at different points) this can bite.

Claiming on capital gains. Under the India-US DTAA, capital gains on US equities are taxable only in India for Indian residents. There is no US tax to credit. People often try to claim US broker fees or state taxes here — neither is creditable.

Forgetting Schedule FA. Form 67 / Form 44 deals with the income side, but the foreign holdings themselves must be reported in Schedule FA. The two schedules are independent. Filing one does not waive the other.

Timeline for AY 2026-27

For income earned 1 April 2025 to 31 March 2026, the relevant dates are:

• 31 July 2026 — ITR-2 due date for individuals not subject to audit. File Form 67 before or with the ITR.
• 31 December 2026 — Last date for filing a belated or revised return under section 139(4)/(5).
• 31 March 2027 — End of the assessment year. Last date to file Form 67 under Rule 128(9) if you are filing original or belated return.
• 31 March 2030 — Last date for an updated return under section 139(8A); Form 67 must be filed on or before the updated return's due date.

After 1 April 2026, Form 44 takes over for income earned in Tax Year 2026-27 (FY 2026-27), which will be reported in 2027. AY 2026-27 returns filed in 2026 stay on Form 67.

Tools

We built a calculator that takes your gross foreign dividend, US withholding rate, and Indian slab — and tells you exactly what FTC to claim and what the net Indian tax on the income will be. Try the Form 67 / Form 44 FTC calculator.

If you also need to sanity-check the US side of the same flow — what W-8BEN does, what 1042-S shows, why the rate is 25 percent rather than 30 — see our companion explainers on the W-8BEN form and the US dividend withholding mechanics.

The bottom line

The form number is changing. The credit is not. For AY 2026-27 — the returns you file in 2026 for income earned in FY 2025-26 — Form 67 remains the operative filing, with a sensible deadline of 31 July 2026 to keep things clean. From the tax year starting 1 April 2026, Form 44 takes over under the new Act, with broadly the same mechanics and a likely tightening of CA-verification rules. The hard part has always been documentation discipline and timing, not the form itself. Get the 1042-S, file before the ITR, mirror the numbers across Form 67, Schedule FSI and Schedule TR, and the 25 percent the US has already taken from your dividends comes back to you as an Indian tax credit. Skip any of those steps and you pay both countries on the same dollar.