As an Indian exporter, navigating the complexities of international transactions and compliance can feel like solving a complex puzzle. Today, we'll explore a crucial piece of that puzzle: FIRC

FIRC full form is Foreign Inward Remittance Certificate. It is a document issued by banks as proof of receiving international payments. Over the years, regulations around FIRC have changed significantly, creating confusion and mystery around this important document. Let's clear the air and decode the what, who, and why of FIRC.

What is FIRC? FIRC Full Form, Meaning and More

As we've covered, the full form of FIRC is a Foreign Inward Remittance Certificate and it serves as a proof of foreign transfers. Until 2016, <a href="https://rbidocs.rbi.org.in/rdocs/FEMAMASTER/PDFs/1061.PDF?no_follow=true/">AD Category I Banks</a> were authorised to issue FIRCs to exporters for receiving international payments. This document was essential for exporters to obtain after each cross-border payment. It served not only as proof of payment receipt but also as a crucial document for claiming export-related incentives, such as tax exemptions on foreign currency payments received in India.

Changing RBI Guidelines: From FIRC to FIRA

FIRA is often still referred to by its old name, FIRC. While both documents serve the same purpose, FIRC is technically only issued for returns on&nbsp;Foreign Direct Investment (FDI )or Foreign Institutional Investment (FII). For all other export collections, FIRA is what you need.

For clarity, we'll use the term FIRC moving forward, but it refers to FIRA throughout.

Anyone receiving foreign payments needs FIRC.&nbsp; Beyond goods and service exporters engaging in international trade, many individuals and entities may receive international payments without realising it.&nbsp;

Overall, the following typically require a FIRC:

Beyond compliance, here’s why FIRC is crucial for exporters:

FIRCs are issued by AD Category I banks. You can contact your bank to get your FIRC after receiving your foreign payment. <a href="https://www.skydo.com/blog/how-to-get-firc-certificate-online">Alternatively, you can also use platforms like Skydo to get your FIRC instantly after every payment.&nbsp;</a>

This is a sample FIRC document. All crucial remittance details have been masked for security purposes. Now let’s break the content of a FIRC down: 

Receiving your export payment directly through your bank can make obtaining an FIRC a lengthy process. You need to submit a request to the bank, and the bank typically takes 7-15 days to provide the FIRC. You may also need to follow up multiple times, and banks often charge at least INR 400 to issue the FIRC, depending on the institution.

<a href="https://www.skydo.com/blog/how-to-get-firc-certificate-online">Getting a FIRC</a> might sound like a hassle, but with Skydo, it's a breeze. Our fully automated payment system along with built-in partnerships with banks, ensures effortless compliance with RBI guidelines, without needing any manual intervention.

When you receive an export payment through Skydo, we automatically generate the required FIRC for you at no extra cost. Just log into our user-friendly dashboard, and you'll find your FIRC ready to download, complete with all the details you need. 

In conversations around FIRC, there are a few more terms that get frequently mentioned, one of them being eFIRC. So what exactly is <a href="https://www.skydo.com/blog/efirc-firc-brc-essentials-differences">eFIRC?</a>

What is the difference between eBRC and FIRC?

Generally speaking, e-BRC applies mostly to goods and software exporters (under <a href="https://stpi.in/en/home?no_follow=true/">STPI</a>). If you are one of them, you can use this simple decision tree to understand which documents you will need:

Exporting goods and services is considered Zero-Rated Supply, meaning it is subject to 0% GST. However, to claim a GST refund for the input tax credit, exporters must provide the required documents including FIRC. These documents authenticate that the business is claiming a refund because it exported services and couldn't offset its input tax credit as it would in normal domestic business. Without FIRC, claiming a GST refund may not be possible

As we surge in cross-border transactions, ensuring compliance and safeguarding against illicit activities has become a pressing concern. However, at Skydo, we believe your focus should be on advancing your business, not on grappling with compliance challenges.

With Skydo, enjoy seamless international payments, delivered promptly and without any hidden fees. But that's just the beginning! Every time you receive a cross-border payment, an auto-generated FIRC is readily available for you to download, relieving you of compliance burdens so you can devote your energy to what truly matters: driving your business forward.

Dive into the world of FIRC. Explore the full form, importance, and process of obtaining FIRC for your international transactions

Foreign Inward Remittance Certificate (FIRC): Full form, meaning and RBI guidelines

Prashanth

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Prashanth Kumar

International wire transfer is one of the most popular methods of cross-border payments. Rapid growth in India’s exports and globalization of the economy are two main driving factors for its popularity. In addition, it’s faster and safer compared to risky options like cash, checks, and demand drafts.

So if you’re curious about how international wire transfer works, the documentation process, duration, and fees, this blog is the right guide for you. 

International wire transfer is a term for transferring money across the border electronically – so there is no physical cash involved in the transaction. You only share the bank account details with your client to send money from their bank account.&nbsp;

Today most international wire transfers happen through<a href="https://www.skydo.com/blog/swift-money-transfer-ultimate-guide"> SWIFT</a> – Society for Worldwide Interbank Financial Telecommunications. SWIFT is a communication network designed for banks to transfer money using a standardised code system. The code contains 8 to 11 alphanumeric characters consisting of the bank code followed by its country, location, and branch code.

Documents Required for International Wire Transfer?

Here’s a list of information required for international wire transfer:

If you’re receiving an international wire transfer:

If you’re sending an international wire transfer:&nbsp;

In addition to the receiver’s information you need to furnish the following details

Depending on the volume of the transaction, you may also be asked to share a few documents:

International wire transfer can take 1 to 5 business days to complete. For example, <a href="https://www.hdfcbank.com/personal/resources/learning-centre/pay/how-long-does-a-wire-transfer-take">HDFC Bank</a> takes 5 business days to process international wire transfers. However, it could be more if a higher number of intermediary banks are involved.

How to Make an International Wire Transfer?

There are three ways you can wire transfer money through your bank. We have explained all the ways here and covered an alternative method of transferring money using a third-party service provider.

Transferring money using online banking services

This is the best option if your bank has online international wire transfer facilities. It saves your time from visiting the branch and you can do it from anywhere using an internet connection

Since an international wire transfer happens via SWIFT, here’s how you can make <a href="https://www.skydo.com/blog/swift-money-transfer-ultimate-guide#how-do-i-make-a-swift-money-transfer">overseas transfers using SWIFT:</a>

International wire transfer using a banking app or phone services

A banking app works like an online banking service. After downloading the app, you can log in and follow the same steps above. 

Few banks also offer phone banking services for wire transfers. In this method, you must call the call centre and share personal and banking details with the phone banking staff. They will guide you with the remaining steps.

International wire transfer by in-person visit to your bank

If your bank doesn’t offer online services for international wire transfers or you're more comfortable with in-person visits,&nbsp; you can visit your nearest bank branch and follow the below steps:

International wire transfer using a third-party service provider

Banks are not the only option to make international wire transfers. Several stand-alone platforms like <a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives">PayPal</a> and <a href="https://www.skydo.com/blog/transferwise-india-features-benefits-pros-cons">Wise</a> also allow you to make and receive international wire transfers and more often than not they can do it faster than banks. However, it is important to be aware of the charges that these platforms levy on international wire transfers including the exchange rate that they are offering.

Through Skydo, you can receive international wire transfers via SWIFT from over 150 countries that too at live forex rate.&nbsp;

International wire transfers are usually safe because they are conducted over secure networks like SWIFT. The transactions are encrypted and monitored to safeguard against unauthorized access.&nbsp;

Having said that, there are certain inherent risks like sending money to the wrong account. Once a wire transfer has been executed, it’s impossible to reverse it. This can be avoided by confirming the bank account details with the recipient before sending them.&nbsp;

Information exposure or phishing attacks might occur at the recipient’s end if their bank account details fall into the hands of fraudsters. 

What Are the Compliance Regulations Around International Wire Transfers?

The <a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance">Reserve Bank of India (RBI) monitors wire transfers</a> in India. RBI implements compliance requirements based on the<a href="https://enforcementdirectorate.gov.in/fema"> Foreign Exchange Management Act (FEMA), 1999</a>.&nbsp;

Some of the compliance regulations are as follows:

It’s mandatory to mention the<a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance"> purpose code</a> whether you’re sending or receiving a wire transfer payment.&nbsp;

International Wire Transfer Fee: What You Need to Know

Banks charge various fees for international wire transfer. Here’s an overview of the different categories of fees and how much you will end up paying if you choose to wire transfer via popular banks in India:

These charges are associated with using the SWIFT network to wire funds. SWIFT fee can be charged as a flat fee or a certain percentage of the transaction value. Either way, the fee ranges between INR 500-1000.

Most banks don’t offer live forex rates and instead apply a markup. For example, say you’re receiving an international wire transfer of USD 2,000 from your U.S.-based client, with the current exchange rate at 1 USD = INR 84. Instead of INR 84, however, your bank might apply a lower exchange rate, such as INR 82, reducing your effective income from INR 168,000 to INR 164,000—meaning you lose out on INR 4,000.

The calculation of this fee depends on the intermediary banks that facilitate the transaction. Therefore it cannot be calculated upfront.&nbsp;

This is applicable when you receive a payment from overseas via an international wire transfer from an international client. You need to procure <a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">FIRA for every international payment</a>, however, most banks charge a fee for providing the same, For example, <a href="https://www.axisbank.com/Docs/default-source/default-document-library/schedule-of-charges-for-foreign-exchange-transactions.pdf">Axis Bank </a>charges ₹250 for issuing a FIRA

Service tax is not fixed and differs from one bank to another

This does not apply to every bank, but a few might do it. For example, HSBC charges INR 100 plus tax if you cancel a wire transfer

How much do popular banks charge for wire transfers?

<a href="https://www.icicibank.com/personal-banking/online-services/funds-transfer/outward-remittance/branch-transfer/wire-transfer">ICICI</a>

If you’re curious about how much you must pay while receiving a wire transfer, check our<a href="https://fx-calculator.skydo.com/comparison?utm_source=Social%20Media&amp;utm_medium=Skydo&amp;utm_campaign=FX%20Calculator"> FX calculator</a> to easily get accurate information.

Which Banks in India Support International Wire Transfer

Following is the list of popular AD Cat I banks in India that support international wire transfers:

If you want to check the entire list of AD Cat I banks, here’s the link to the <a href="https://rbidocs.rbi.org.in/rdocs/FEMAMASTER/PDFs/1061.PDF">RBI website</a>.

Receive fast and secure International Payments with Skydo

When receiving international payments, getting paid quickly and minimizing fees are top priorities. While banks are often the default choice, they fall short in both speed and cost-efficiency.

Virtual accounts offer a smart alternative, connecting directly to your real bank account while bypassing costly SWIFT fees and delivering funds faster. Skydo makes this easy, providing international virtual accounts where your U.S. clients can pay you locally. With Skydo, you’ll benefit from flat fees, live forex rates without markups, and free FIRAs with every transaction.

Switch to Skydo to experience faster, more affordable payments that put more money in your pocket.

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International Wire Transfer

A well-developed inward remittance infrastructure is essential for India’s economic growth. It makes it easy for exporters to earn foreign exchange and individuals to receive money from their family members abroad.&nbsp;

But the infrastructure must be secure and prevent attacks from harmful money laundering and illegal activities like terrorism financing. The Reserve Bank of India (RBI) takes up that responsibility. It actively monitors foreign exchange transactions in India and establishes guidelines to safeguard the economy from such threats.&nbsp;

This blog post dives deep into the RBI guidelines and uncovers its effect on personal and business international remittances.

What are the RBI and FEMA guidelines for inward remittance in India?

Before we head to the FEMA guidelines here is a primer on FEMA. FEMA is an abbreviation for the Foreign Exchange Management Act passed in the parliament in 1999.

The FEMA oversees cross-border payments in India and sets up guidelines for foreign trade. The RBI implements these guidelines and establishes the legal framework for all businesses and individuals engaged in foreign trade and services.&nbsp;

Here is the list of FEMA guidelines that cover the most important aspects of compliance in inward remittance in India:

Only specific financial institutions are authorised by <a href="https://enforcementdirectorate.gov.in/fema">RBI u/s 10 (1) of FEMA</a>., 1999 to deal in foreign inward remittances and are referred to as Authorized Dealer Category I (AD Cat I) banks.&nbsp;

These banks buy and sell foreign currency to facilitate international transactions. They also oversee and report all inward remittances to RBI through the <a href="https://www.skydo.com/blog/understanding-edpms-full-form-and-its-essential-role-in-export-management">Export Data Processing and Monitoring System (EDPMS)</a>.&nbsp;

Foreign Inward Remittance Certificate (FIRC)

<a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">FIRC</a> is the proof of inward remittance. It’s a necessary document for exporters, Indian companies offering services outside India, and freelancers to prove that they have received money from an international client. The FIRC contains details about the remitter, amount, and purpose of remittance among other crucial information. FIRC is more important for exporters because it’s useful for claiming export-related incentives and GST refunds.

<a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance">Purpose codes</a> define the purpose of the remittance. You will find the<a href="https://www.rbi.org.in/upload/notification/pdfs/52220.pdf"> purpose code list</a> on the RBI website to identify the purpose of your transaction. After you have identified that, mention the purpose code to your bank.&nbsp;

You must be careful when you mention the purpose code to your bank. Incorrect information could result in compliance issues resulting in the cancellation of the transaction or legal actions in the worst case scenario. For example, if you’re an exporter of goods and entered into an agreement with the buyer to receive the full invoice value after they receive the shipment, then the purpose code for you is P0102. If you use P0103 which is applicable for exporters receiving advance payments, your payment could be denied.&nbsp;

What are the Documents Required for Inward Remittance in India?

The list of documents depends on the nature of the transaction. For example, the document list for an individual receiving money from a family member in a foreign country will be different from an exporter. We have listed all the documents for each category:

Identification proof: Any government-issued document that proves you’re a citizen of the country falls in this category. So your Passport, Aadhar Card and Voter ID will qualify.&nbsp;

Bank account details: Your bank name, account number, branch location, and IFSC code are the three most important information you must share with the remitter to receive foreign inward remittance

Purpose code: Check on the RBI purpose code list to find the most appropriate purpose code. There are different codes based on the purpose behind the personal transfer. For example, if you’re receiving the money for family maintenance and savings, then P1301 is the right code. You can find the right purpose code for your business <a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance">right here</a>.&nbsp;

Receiving payment for business transactions

This not only applies to exporters but also freelancers and consultants who receive cross-border payments

Foreign Inward Remittance Certificate (FIRC): Once the payment reaches your bank account, you’ll need to request an FIRC from your bank to confirm receipt of funds. This usually involves a fee of around INR 400, and you can expect to wait at least a week before the FIRC is issued. However, platforms like Skydo provide free <a href="https://www.skydo.com/blog/how-to-get-firc-certificate-online">online FIRC</a> for every transaction instantly.&nbsp;

Invoice: The invoice should clearly mention the nature of the transaction like the item details in case you export goods.

Contract: Your bank might ask you to produce a copy of the agreement to understand your business relations with the international client.

Purpose code: The purpose code is essential because it defines the reason for payment. Double-check the purpose code before you share it with your bank to avoid hassles like cancellations or reversals.

KYC: If you’re an export organization, the Certificate of Incorporation, Memorandum, and Articles of Association are the most important KYC documents.

Bank account details: &nbsp;Your bank name, account number, branch details, and IFSC code will come under this category

Declaration form: Banks demand a declaration form during large transactions. You must submit an undertaking to the bank that the money is from a legitimate source and that you’re not involved in any illegal activities. This is done to increase transparency in transactions and track foreign funds.

Generally, there is no tax liability on foreign inward remittances in India. However, there are exceptions you should be mindful of to adhere to tax compliance laws:

Gifts: If the value of personal gifts from non-relatives exceeds INR 50,000 in a financial year, then you will be taxed as per the provisions mentioned <a href="https://ctconline.org/wp-content/uploads/pdf/2019/seminar-presentation/income/Study-Circle-Meeting-18-4-2019-Devendra-Jain.pdf">u/s 56 (2) (x) of the Income Tax Act</a>.&nbsp;

Foreign income: Foreign income in the form of salary or business proceeds will be taxed according to your income tax slab rate.&nbsp;

Income from investments: Any form of income you generate from foreign investments will also be taxed according to your income tax slab rate

GST: There is no<a href="https://www.skydo.com/blog/decoding-gst-on-foreign-exchange"> GST on foreign exchange</a>. However, payment platforms may charge 18% as a transaction fee for receiving inward remittances.&nbsp;

What income sources are Prohibited in the Inward remittance RBI guidelines?

Inward remittance from the following sources is strictly prohibited under the <a href="https://www.bcasonline.org/Referencer2015-16/Other%20Laws/fema.htm">FEMA guidelines</a>:

Online gaming: Any income generated from online gaming websites, betting or gambling platforms cannot be remitted to India.&nbsp;

Other speculative or illegal activities: This broad category covers all forms of income generated through illegal activities like drug trafficking.&nbsp;

Lottery winnings: If a lottery is a source of income, you cannot remit the funds to India. This is so because it’s difficult to track the source of the lottery and could be associated with money laundering.

Winning from races or riding: Income generated from betting on races is treated as income from gambling activities. Therefore it is banned from inward remittance transactions.

Earnings from banned magazines: Banned magazines promote violence and hatred towards communities or some other form of illegal content. Allowing income from such sources to enter the country could be a threat to cultural stability.

Sweepstakes: Sweepstakes are like lotteries and could be traced back to illegal marketing schemes. Preventing them means preventing unlawful income through inward remittance.&nbsp;

There are two methods to receive foreign inward remittances in India – Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS)

However, to use these methods they have to go through the AD-Cat I banks and cannot do it on their own.

Where to Show Receipt of Foreign Remittance While Filing ITR?

If you’re earning foreign income as a salary from working remotely with an international company, you can report it as 'income from salary' in your ITR. For freelance income, you may choose the presumptive taxation scheme and file ITR 4, or classify it as 'income from business or profession.' However, if you hold foreign assets or receive capital income from abroad—such as dividends, interest, or capital gains—you’ll need to declare these under Schedule FA in ITR 2 or 3.&nbsp;

&nbsp;Receive 100 % safe and compliant International Payments with Skydo

Banks may be the most common way to receive inward remittances, but they’re far from the best. Slow processes, hidden fees, and unclear final amounts mean you’re often left waiting—and wondering—about how much will actually arrive in your account.

Exploring alternative options, like international virtual accounts, can make a big difference. Virtual accounts offer three major benefits: they keep your bank details private, speed up the transfer process, and eliminate hefty SWIFT fees. Platforms like Skydo provide a streamlined experience with flat fees and immediate FIRC issuance as soon as funds arrive. By choosing a smarter remittance solution, you can save time, cut costs, and stay in control of your money.

Compliance guidelines for inward remittance

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Thinking about launching an import-export business or taking your current business international?

An IEC Code (Import Export Code) is your key to making it happen. This 10-digit code, issued by the DGFT, is essential for any business dealing with cross-border trade. With an IEC Code, you’ll have access to smoother customs clearance, seamless international payments, and exclusive export benefits.

In this guide, we’ll cover everything you need to know about getting an IEC Code—from registration to benefits—so you’re ready to start trading globally with ease.&nbsp;

IEC code stands for Importer Exporter Code. It is a vital 10-digit identification number required for anyone willing to engage in import or export activities in India. 

The IEC code is issued by the Directorate General of Foreign Trade (DGFT) and is essential for clearing customs and facilitating international trade transactions.

Any business entity looking to start an international business involving import/export operations can apply for an IEC code. This includes:

IEC code is essential for any business engaged in international trade activities in India. Here are the key situations when you need an IEC code:

The IEC code is mandatory for customs clearance of goods at ports and airports during import and export operations. Customs authorities require this code to ensure that shipments comply with legal regulations.

Banks require IEC code when processing international payments. This ensures that transactions are legitimate and comply with trade laws, facilitating smooth financial operations for importers and exporters.

Having an IEC code is necessary to benefit from various government schemes, such as the Merchandise Exports from India Scheme (MEIS) or <a href="https://www.skydo.com/blog/seis-guide">Service Exports from India Scheme (SEIS)</a>. These incentives can significantly enhance a business's profitability.

The <a href="https://www.skydo.com/blog/iec-code-apply-online">IEC code registration process</a> is as follows:&nbsp;

Here’s how you can view and print your IEC code:&nbsp;

It is important to verify IEC code as it confirms the authenticity and validity of this code, which is mandatory for businesses involved in international trade. A verified IEC code enhances the company's credibility with international partners and financial institutions and helps prevent fraud while streamlining customs clearance processes for efficient trade operations.

To verify your Importer Exporter Code IEC code (Import Export Code), you can use the ICEGATE and DGFT portals. Here’s how:

Alternatively, you can also verify your IEC code via <a href="https://www.icegate.gov.in/">ICEGATE</a> website. To check your IEC status, access the Services tab, select Check IE Code/BIN Status, enter your IEC code, and click IE Code@ICEGATE to view detailed status information.

What Documents Are Required for IEC Code Registration?&nbsp;

Here are the required documents for the IEC application:

What is IEC Code Registration Fees?&nbsp;

The IEC code registration fee structure is as follows:&nbsp;

Here are the key benefits of having an IEC code:

IEC enables legal cross-border trade, letting businesses enter international markets and conduct import-export operations smoothly.

Leverage the benefits of government schemes

Access to export promotion schemes like MEIS (Merchandise Exports from India Scheme), which helps offset infrastructure inefficiencies, and SEIS (Service Exports from India Scheme), which offers duty credits based on foreign exchange earnings.

GST exemptions are available for exporters when filing a Letter of Undertaking (LUT), allowing goods to be exported without upfront tax payment.&nbsp;

Linking IEC with GST unifies business identification, streamlines compliance through automatic updates, facilitates financial tracking, and enables access to export incentives while enhancing operational efficiency. The linkage should be established during initial GST registration and verified annually during the DGFT compliance review period.

Below are the steps to link your IEC code with GST (Goods and Services Tax):&nbsp;

Take Your International Business Further with Skydo

Getting your IEC code is the first step toward establishing your presence in international markets. While the process might seem complex, following the proper steps and maintaining annual compliance ensures smooth international trade operations.

For businesses ready to leverage their IEC code, platforms like Skydo offer secure and efficient international payment solutions. With features like real-time payment tracking, multi-currency support, and automated compliance checks, Skydo complements your IEC by streamlining cross-border transactions at lower fees than traditional banks.&nbsp;

By combining your IEC compliance with Skydo's payment infrastructure, you can focus on growing your international business while ensuring regulatory compliance.

<a href="https://www.skydo.com/">Explore Skydo</a>&nbsp;

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IEC code full form

Working with international clients is exciting, but dealing with taxes? Not so much!

If you're providing services abroad, you might be worried about getting taxed twice - once in the client's country and again in India. For instance, when a US client pays you, they might deduct their local tax, and India wants its share, too!&nbsp;

This is where the Foreign Tax Credit (FTC) comes to your rescue. And to claim it, you need to fill out Form 67.&nbsp;

In this guide, we'll walk you through the steps of filing Form 67, and how to claim a Foreign Tax Credit for taxes you've already paid abroad. No more paying twice for the same income!

What is the Foreign Tax Credit in Form 67?&nbsp;

Foreign Tax Credit is a mechanism that allows you to claim credit in India for taxes you've already paid in another country on your foreign income. It's designed to prevent double taxation - paying full taxes twice on the same income. You must file Form 67 with the Indian tax department to claim this credit.

It's like getting a discount on your Indian taxes for the tax you've already paid in another country.&nbsp;

Here's a quick example to make it clearer:

Let's say you're a freelance graphic designer in India who did work for a United States company:

Using Form 67, you can claim credit for the ₹62,250 already paid in the US:

Final tax you pay in India: INR1,24,500 - INR62,250 = INR 62,250

This way, you're not paying full tax twice on the same foreign source income. Just remember to file Form 67 before your tax return and keep proof of the foreign tax you paid so that you can claim your foreign tax credit.

Overview of Foreign Tax Credit in India&nbsp;

India has set up specific rules to help you claim credit for taxes paid abroad - it's like getting a refund on your Indian taxes for what you've already paid in other countries.&nbsp;

India manages FTC through two main sections of tax law:

<a href="https://kb.icai.org/pdfs/PDFFile5b4f2a767133a8.00550566.pdf">Section 90</a> - For countries with tax agreements

Like having a mutual discount arrangement, India has DTAAs (think of them as tax-saving partnerships) with many countries, including the US, UK, Canada, Australia, and Germany.

Let's take the India-US agreement, for example. If you work with US clients, they might deduct a maximum of <a href="https://www2.deloitte.com/content/dam/Deloitte/in/Documents/tax/in-tax-gbt-us-llc-eligible-for-india-us-tax-treaty-benefit-noexp.pdf">15%</a> tax on your payments (lower than usual rates!). You can claim this as credit in India. This agreement makes it easier for freelancers and businesses to work across borders without worrying about paying hefty taxes twice.

Remember: These agreements are like a VIP pass—they give you special tax benefits that you wouldn't get otherwise!&nbsp;

Section 91 - For countries without agreements

You can still claim credit for taxes paid, but following Indian tax rules.&nbsp;

Here's a simple example for Section 91: Suppose you earn ₹3,00,000 from a property in Brazil. You paid ₹75,000 (25%) tax there and owe ₹90,000 (30%) in India. You can claim the lower amount (₹75,000) as credit, so you'll only pay ₹15,000 more in India.

Think of it as a general credit system instead of a particular arrangement.&nbsp;

Rules for Claiming Foreign Tax Credit in India (Rule 128)

For example, If you paid INR 10,000 abroad but the Indian tax would be INR 8,000, you can claim INR 8,000

When claiming your tax credit, remember that only the actual tax you paid counts - any late fees, penalties, or interest charges won't qualify for credit. If you're working with clients from different countries, you must keep each country's calculations separate.&nbsp;

Stay away from claiming credit for any taxes that are under dispute, as this could cause problems later. Lastly, always convert your foreign earnings to rupees using official exchange rates, as the tax department won't accept any other conversion method.

The point is to avoid paying full tax twice on the same income while keeping things fair for both countries. You wouldn't want to pay the total price for the same item at two different stores!&nbsp;

Documents Required to Claim Foreign Tax Credit with Form 67 in India

When claiming FTC with Form 67, you'll need some paperwork to prove your foreign income and taxes paid—think of it as keeping receipts for your tax deductions.&nbsp;