What is Form 67 and when must it be filed?

Form 67 is the prescribed form under Rule 128 of the Income Tax Rules 1962 for claiming Foreign Tax Credit in India. It must be filed on the Income Tax portal before or simultaneously with the filing of the ITR. It cannot be filed after the ITR. Missing the deadline permanently waives the credit for that assessment year.

What is the US withholding tax rate on dividends for Indian residents?

Under the India-USA DTAA, Article 10, the withholding tax on dividends is reduced from the standard 30% (applicable to non-residents under US domestic law) to 25%. To avail this reduced rate, you must have a valid W-8BEN form on file with your broker. Without it, the broker withholds 30%.

Is there a cap on Foreign Tax Credit?

Yes. The FTC under Rule 128 is capped at the Indian tax payable on the same income. If the US withheld 25% and your Indian slab rate on the dividend is 20%, you can only credit 20% — not 25%. The excess 5% is not refundable.

Do I need Form 1042-S to claim FTC?

Form 1042-S (US tax form for foreign person's US source income) is issued by your broker and shows gross dividend and US tax withheld. It is the ideal supporting document for Form 67. If your broker doesn't issue it, your consolidated account statement showing dividend credits and the transaction history showing withholding is acceptable. Keep whichever document you have.

Claiming Foreign Tax Credit on US Stock Dividends — Form 67 Guide for Indian RSU Holders

Q: What exchange rate should I use to convert US dividend income to INR?

The SBI TT Buy rate on the last working day of the month immediately before the month in which the dividend was credited — per Rule 115 of the Income Tax Rules 1962. This is the TT Buy rate, not the TT Selling rate. Using the wrong rate (selling instead of buying) is a common error that understates the INR value of the dividend.

By CA Nishant Loya, Palod & Loya, Hyderabad · Updated May 2026 · 10 min read

If you hold RSU shares in a US-listed company and that company pays dividends, the dividend hits your Fidelity or Morgan Stanley account with US withholding tax already deducted. In India, that same dividend is also taxable as "Income from Other Sources" at your slab rate. Without a Foreign Tax Credit (FTC), you pay tax twice on the same income. With it — and with the right process — you recover some or all of the US tax against your Indian liability.

The process is not complicated, but it has specific requirements that are easy to miss. This guide covers what happens to US dividends, how the India-USA DTAA reduces the withholding rate, and exactly what needs to be filed — and when — to claim your credit.

Applicable law: Section 90 of the Income Tax Act 1961, Rule 128 of the Income Tax Rules 1962 (Form 67), India-USA DTAA Article 10 (dividends), Rule 115 (exchange rate), Schedule OS, Schedule FSI and Schedule TR of ITR-2.

What the US Withholds — and Why W-8BEN Matters

The US Internal Revenue Service taxes dividends paid to non-resident aliens at a flat 30% under US domestic law. For Indian residents, the India-USA Double Taxation Avoidance Agreement (Article 10) reduces this to 25% — but only if your broker has a valid W-8BEN on file for you.

W-8BEN is a certificate of foreign status. Your broker — Fidelity, Morgan Stanley, Charles Schwab — requires this to apply the treaty rate. If you never submitted it, or if it expired (W-8BEN is valid for three calendar years plus the year of signing), the broker defaults to 30%.

Check your W-8BEN status now. Log into your broker account and look for the tax forms or certification section. An expired or missing W-8BEN means you are being withheld at 30% instead of 25% — and you cannot recover the 5% difference as FTC since the India-USA DTAA only provides credit up to the treaty rate applicable to you as a treaty-resident.

Once W-8BEN is in place, the broker withholds 25% on any dividend. That amount appears in your account statement as "federal tax withheld" or "US tax withheld" alongside each dividend credit.

How India Taxes the Same Dividend

Dividend income from foreign stocks is taxable in India under Section 56(2)(i) — Income from Other Sources. The gross dividend (before US withholding) is added to your total income and taxed at your applicable slab rate.

For someone in the 30% slab: the gross dividend is taxed at 30% plus surcharge and 4% cess in India. The US withheld 25% on the same amount. Section 90 allows you to credit the lower of (a) the Indian tax on that income or (b) the foreign tax paid on that income. In this case, Indian tax (30%+) exceeds the US withholding (25%), so the full 25% is creditable.

For someone in the 20% slab: Indian tax is 20%. US withholding was 25%. You can only credit 20% — the Indian tax on that income. The excess 5% withheld by the US is not refundable in India. It is a permanent cost.

Indian slab rate	US withheld (with W-8BEN)	FTC you can claim	Net Indian tax after FTC
30%	25%	25%	~5% (plus surcharge/cess)
20%	25%	20%	0%
10%	25%	10%	0%

The credit is computed per source-country, per income category — not in aggregate across all your foreign income. You cannot use excess FTC from dividends to offset Indian tax on capital gains from the same shares.

The Exchange Rate — TT Buy, Not TT Sell

Converting US dividend income and US tax withheld to INR must use the SBI TT Buy rate — specifically the rate on the last working day of the month immediately before the month in which the dividend was credited to your account, per Rule 115 of the Income Tax Rules 1962.

This is the TT Buy rate. Not the TT Selling rate. Not the RBI reference rate. Not the rate your bank applied when you remitted money. The SBI TT Buy rate on the applicable month-end is the only legally prescribed rate under Rule 115, and it applies to all foreign currency conversions for income tax purposes — capital gains, dividends, and the withholding tax figure alike.

A dividend credited in March 2025: use the February 28, 2025 SBI TT Buy rate. A dividend credited in September 2025: use the August 31, 2025 rate. Apply the same rate to both the gross dividend and the US tax withheld when computing the INR figures for Form 67.

Financial Year vs Calendar Year — Which Period Applies

Dividend income is reported in the Indian financial year in which it was received — not the US calendar year. A dividend credited to your Fidelity account on July 15, 2025 falls in FY 2025-26 (AY 2026-27). A dividend credited on February 3, 2025 falls in FY 2024-25 (AY 2025-26).

This is different from Schedule FA, which follows the calendar year for asset disclosure. The same dividend income appears in Schedule FA A3 for the calendar year (CY 2025) and in Schedule OS and Form 67 for the Indian financial year (FY 2025-26) — both in the same ITR. They are tracking different things: the asset (Schedule FA) vs the income (Schedule OS and Form 67).

What to File — Step by Step

Step 1: Gather your dividend data

From your broker account, download the annual dividend report or Form 1042-S. Form 1042-S is a US tax document that shows gross dividend, US tax withheld, and the payer details. Not all brokers issue it automatically — some require you to download it from the Tax Documents section of your account. If your broker does not issue Form 1042-S, your consolidated account statement with the dividend transaction history is acceptable.

For each dividend: note the credit date, gross amount in USD, and US tax withheld in USD. Then convert both to INR at the Rule 115 rate for the preceding month-end.

Step 2: File Form 67 before your ITR

Form 67 is filed online through the Income Tax Portal (incometax.gov.in) under e-File → Income Tax Forms → Form 67. You need to file it before or on the same day as your ITR. Filing it after the ITR is not permitted and results in the FTC claim being rejected.

Form 67 asks for: the country of source (USA), the nature of income (dividend), the amount of foreign income in INR, the foreign tax paid in INR, and the tax relief being claimed. One Form 67 can cover multiple dividend payments from the same country.

Form 67 cannot be filed after the ITR. There is no revised-return option for a missed Form 67. The Supreme Court in Wipro Limited v. DCIT confirmed it is a mandatory requirement for claiming FTC — not merely procedural. Missing the deadline means paying Indian tax on the full dividend with no credit, for that year.

Step 3: Report in ITR-2

Three places in ITR-2 need to be filled consistently:

Schedule OS — report gross dividend income (before US withholding) under "Dividends from foreign companies"
Schedule FSI — report the source country (USA), gross income, foreign tax paid, and credit claimed
Schedule TR — the tax relief summary which picks up from Schedule FSI

All three must be filled and must be consistent with Form 67. A mismatch between Form 67 and Schedule FSI is a processing error that delays your refund or generates a demand.

Partial Year Holdings and Changing Share Counts

If your RSU shares vest mid-year, you only receive dividends on the shares you hold post-vesting. Your Fidelity account statement will show dividends credited after the vest date. If you sold shares between two dividend payment dates, the dividend for the partial holding period will be smaller than the dividend for the full period.

Each dividend credit event is a separate line in your Form 67. Aggregate them by country (all US dividends in one Form 67) but ensure each credit date maps to the correct SBI TT Buy rate. Do not use a single rate for the whole year.

What This Looks Like — A Worked Example

Ravi holds 200 NVIDIA shares throughout CY 2025. NVIDIA pays a quarterly dividend of USD 0.10 per share.

Gross dividend per quarter: USD 20 (200 × $0.10)
US withholding at 25%: USD 5
Net credited: USD 15
Annual gross dividend: USD 80 (4 quarters)
Annual US tax withheld: USD 20

Converting at average illustrative rate of ₹85 per USD (using actual Rule 115 rates for each quarter in practice):

Gross dividend in INR: ₹6,800
Indian tax at 30% slab: ₹2,040 (plus surcharge + 4% cess)
US tax withheld in INR: ₹1,700
FTC claimed: ₹1,700 (lower of Indian tax and foreign tax)
Net Indian tax payable: ₹340 (plus surcharge/cess)

Without filing Form 67: the full ₹2,040 would be payable in India in addition to the USD 20 already withheld in the US.

Dividend income and Form 67 data — extracted from your broker statement

Upload your Fidelity, Morgan Stanley or Schwab statement. GainSutra extracts each dividend event, converts to INR at the correct Rule 115 SBI TT Buy rate, and prepares the Form 67 data ready for filing. No manual currency lookups.

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Frequently Asked Questions

My W-8BEN expired and the broker withheld 30% instead of 25%. Can I recover the extra 5% in India?

No. The India-USA DTAA limits the withholding to 25% for treaty-resident Indians. You can claim FTC up to the treaty rate (25%) against your Indian tax — but only if you were actually eligible for the 25% rate and it was applied. If 30% was withheld due to a missing W-8BEN, you can only claim a credit for 25% (the treaty-permitted amount). The extra 5% is recoverable from the IRS through a US tax return — but that involves a separate process and is rarely worth it for small amounts. The practical fix is to renew your W-8BEN immediately so future dividends are withheld at 25%.

I received dividends from multiple US companies. Do I file one Form 67 or one per company?

One Form 67 per source country is sufficient. All US dividend income goes into a single Form 67 under USA. Within the form, you can list multiple income items. What matters is that the total gross income, total foreign tax paid, and total credit claimed are accurate and match Schedule FSI in your ITR.

My company announced a special one-time dividend after an acquisition. Is it treated the same way?

For Indian income tax purposes, yes — all dividends from foreign companies are taxable under Section 56(2)(i) regardless of whether they are regular, special, or related to a corporate event. The US withholding treatment depends on the nature of the payment under US tax law, but for the Indian filing it is dividend income, converted to INR at Rule 115 rate, reported in Schedule OS, and eligible for FTC via Form 67.

Can I claim FTC on dividend income if I have a loss from capital gains in the same year?

The FTC under Rule 128 is calculated on the Indian tax attributable to the specific foreign income — not your total income or total tax. Capital gains losses do not reduce the FTC computation. Even if your net capital gains position is zero or negative, the dividend income is separately taxed at slab rate and the FTC is computed on that tax separately.

My broker credits dividends in fractional cents and rounds them. How exact do I need to be in Form 67?

Report in INR rounded to the nearest rupee. Minor rounding on individual dividend amounts — especially for fractional shares common in ESPP — is acceptable. What matters is that the gross total and foreign tax total are reasonably accurate and consistent with your broker statements. Keep the statements as supporting documentation in case of queries.