Claiming foreign tax credit: Form 67 now, Form 44 from tax year 2026-27

Short answer: the credit for tax withheld abroad is claimed on a separate form, not in the return itself. For AY 2026-27 and earlier that is Form 67 under Rule 128. From tax year 2026-27 it becomes Form 44, under Rule 76 of the Income-tax Rules 2026 and Section 533(2)(q) of the 2025 Act. Miss it and the foreign tax is simply a cost.

If you hold US shares through an employer plan, the tax withheld on your dividends is recoverable against Indian tax — but only through this filing, and only up to a cap most people do not expect.

What the form is doing

The same dividend is taxed twice: once abroad, withheld at source, and once in India, where a resident's global income is taxable. The credit stops that being a double charge.

Where India has a treaty with the country concerned, relief runs through Sections 90 and 90A. Where there is no treaty, Section 91 gives unilateral relief. Either way the mechanism is the form.

The cap nobody expects

The credit is the lower of:

• the foreign tax actually paid on that income, or
• the Indian tax attributable to the same income.

Two consequences follow, and both surprise people:

If the foreign withholding exceeds the Indian tax on that income, you do not get the difference. The credit offsets Indian tax; it does not produce a refund. A dividend withheld at 25% abroad against an Indian effective rate below that leaves the excess stranded.

Withholding above the treaty rate is not an Indian problem. If the payer withheld more than the treaty permits, the remedy is with the foreign revenue — a refund claim there, not a larger credit here.

Where each figure comes from

Everything the form needs is in statements you already hold:

The figure most often got wrong is the first. What reaches the bank account is net of withholding; the return needs the gross. Using the net figure understates the income and the credit at the same time.

The order it has to happen in

1. Establish which form your year needs — Form 67 (Rule 128) for AY 2026-27 and earlier, Form 44 (Rule 76 of the 2026 Rules) from tax year 2026-27.
2. Total the gross dividends and the tax withheld, cross-checked between the dividend statement and Form 1042-S.
3. Convert at a consistent basis across the credit form, Schedule FSI and Schedule TR — inconsistency between them is itself a source of CPC notices.
4. File the form. The outer limit is the end of the assessment year where the return was timely, but file it before the return, not after.
5. Then file the return, claiming the credit.

That sequencing is the practical heart of it. Once a return has been processed without the credit, a demand issues, and what should have been a filing becomes a dispute.

Where it goes wrong

• Not filing it at all, assuming that showing the foreign tax in the return is enough. It is not.
• Using net dividends instead of gross.
• Expecting the full withheld amount back where the Indian tax on that income is lower.
• Filing after the return and meeting a demand.
• Mixing periods with Schedule FA, which runs on the foreign entity's accounting period — the calendar year — not the Indian financial year.

The disclosure that runs alongside

The credit form claims the credit; Schedule FA discloses the asset. Different periods, different figures, both required. If you hold the shares at all, the disclosure applies whether or not you sold anything — Schedule FA from your broker statement, line by line sets that out, and the same for Fidelity, Schwab and Morgan Stanley maps the other platforms.

If earlier years were missed entirely, see missed Schedule FA, and for years further back, FAST-DS 2026, open until 31 December.

The worksheet below assembles the account, holding and income figures that both filings draw on.

This is a working reference, not the statute. The transition to Form 44 is recent — confirm the current form and rule for your year before filing.