Imagine this: You’re working remotely for a US-based company, and getting paid in dollars. Since the income is earned there, the US deducts tax before paying you.
But you’re still a resident taxpayer in India, which means you have to report that income here as well.
So the obvious question is: Do you have to pay tax on the same income again in India?
Not necessarily. The tax you already paid abroad may be allowed as a credit in India. This relief is called the Foreign Tax Credit (FTC), and to claim it, you need to file Form 44.
What is Foreign Tax Credit?
If you are a tax resident in India, your global income is taxable in India. This means income you earn outside India, such as salary, interest, or capital gains, may also be taxable in India.
But that same income might already be taxed in the country where it was earned.
To prevent paying tax twice on the same income, India allows you to claim a Foreign Tax Credit (FTC).
Foreign Tax Credit lets you reduce the tax you pay in India by the amount of tax already paid on that income in another country. This relief is available under Double Taxation Avoidance Agreements (DTAA) that India has signed with several countries, such as the USA, UK, UAE and Singapore.
To claim this credit, you must report the foreign income and taxes paid in Form 44.
What is Form 44?
Form 44 is the form used to declare foreign income and the taxes paid on it outside India when claiming Foreign Tax Credit.
When you claim FTC in your Income Tax Return (ITR), the details of that foreign income and the taxes paid abroad need to be reported separately. Form 44 is where these details are provided.
It essentially helps the Income Tax Department understand:
- Which country the income came from
- What type of income was earned
- How much tax was paid outside India
- How much credit is being claimed in India
Without filing Form 44, the claim for Foreign Tax Credit may not be accepted.
Who needs to file Form 44?
Form 44 is required for resident taxpayers who want to claim credit for taxes paid outside India.
You may need to file this form if:
- You are a resident individual, HUF, or company
- You earned income from a foreign country
- Tax was paid or deducted on that income outside India
- You want to claim credit for that tax while filing your ITR in India
To claim the Foreign Tax Credit, you must file Form 44 before filing your ITR.
Once you know that the form needs to be filed, you should also keep the supporting documents ready.
What documents are required to file Form 44?
When claiming Foreign Tax Credit through Form 44, you should keep documents that support the income earned and the tax paid outside India. These include:
- Foreign tax certificate: A certificate or statement specifying the nature of income and the tax paid in the foreign country.
- Proof of payment: Documents such as challans, payment acknowledgements, or bank records showing that the tax was actually paid to the foreign government.
- CA Verification: In certain cases, the Chartered Accountant examines the details of foreign income and taxes paid and provides verification for the claim made in Form 44.
If the taxpayer is a company, or if the foreign tax paid outside India is ₹1 lakh or more during the tax year, Form 44 must be verified by a CA before the foreign tax credit is allowed.
Once you have these, let’s see what the form requires from you.
What is the format of Form 44?
Form 44 is divided into three parts, each capturing different details required for the Foreign Tax Credit claim.
Part A: Particulars of the taxpayer
This section captures basic identification details such as:
- Full name and address
- PAN and contact details such as email and phone number
- The tax year for which the foreign tax credit is being claimed
These details help link the credit claim to your income tax return.
Part B: Foreign income and tax credit details
This is the core section of Form 44. Here, you report the details of foreign income earned and the tax paid on that income.
The form requires information such as:
- TIN (Tax Identification Number): The tax identification number issued by the foreign country
- Nature of income: Separate fields are provided for salary, house property, business or profession, capital gains, interest, dividends, royalties, and fees for technical services
- Net income: The income reported should be the net amount included in your Indian tax return after reducing direct and proportionate expenses
- DTAA reference: You must select the relevant Article, paragraph, and sub-paragraph of the applicable Double Taxation Avoidance Agreement (DTAA)
- Disputed foreign tax: If the foreign tax paid is under dispute, the form requires this to be reported separately since only the undisputed portion is generally eligible for credit
Part C: Refund of foreign tax
Part C covers situations where a foreign tax refund is received for which credit was previously claimed in India.
This form requires disclosure of refunds arising from:
- Carry backward of current year losses
- Revision of the Income Tax Return (ITR)
- Revision of the income declaration
- Any other reason leading to a foreign tax refund
This ensures that any foreign tax credit claimed earlier can be adjusted if the tax paid abroad is refunded later.
You can also refer to the official draft we’ve attached below.
Draft Form 44.pdf (189.4 KB)
Questions? Let’s sort them out.