A Delhi ITAT ruling has provided relief to a taxpayer who mistakenly reported his Australian salary in his Indian income tax return (ITR). According to an ET Wealth report, the tribunal ruled that the ₹14.16 lakh salary earned while working in Australia was not taxable in India under the India-Australia Double Taxation Avoidance Agreement (DTAA). The taxpayer, identified as Mr Gupta from IP Extension, Delhi, had inadvertently declared this income as taxable in his Indian ITR for Assessment Year 2020-21, which was filed on September 29, 2020. Since he was abroad for the entire year and received the salary from the Australian company for services rendered there, technically Indian tax authorities could not demand any tax from him, but his own declaration caused the tax dispute.
Despite granting relief on taxability, the tribunal refused to allow the taxpayer's claim for foreign tax credit of ₹3,40,428 for taxes paid in Australia. As reported by ET Wealth, the tribunal reasoned that foreign tax credit is available only against income that is taxable in India. Since the salary was held to be exempt from Indian tax under the DTAA, there was no Indian tax liability against which the Australian taxes could be credited. The FTC claim therefore failed, with the tribunal directing that the foreign tax credit of ₹3,40,428 was also not eligible to be given to the assessee. The salary received in Australia was subjected to taxation in Australia as per their tax laws, with a sum of ₹3.4 lakh deducted as tax at source in Australia.
According to the ET Wealth report, after realizing the mistake, the taxpayer filed Form 67 to claim foreign tax credit and sought rectification under Section 154 of the Income-tax Act to exclude the Australian salary from his Indian taxable income. The Centralised Processing Centre (CPC), Bengaluru, rejected the rectification request, prompting the taxpayer to challenge the decision before appellate authorities. His representatives, including Mr Vinod Bindal, Chartered Accountant Ms. Rinky Sharma and Advocate Amol Jha, argued that under Article 15 of the India-Australia DTAA, salary is generally taxable in the country where the employment is exercised, since the services were rendered entirely in Australia. The tribunal ruled on June 30, 2026, holding that salary earned in Australia for services performed there cannot be taxed in India under the India-Australia DTAA, but consequently, the taxpayer was also not given foreign tax credit for Australian taxes paid.
The ruling comes with important implications for taxpayers with overseas income. As noted by ET Wealth, Mihir Tanna, Associate Director at S.K. Patodia LLP, highlighted that the Income Tax Department relaxed the timeline for filing Form 67 through Notification No. 100/2022. From FY23 onwards, taxpayers can file Form 67 up to the end of the relevant assessment year to claim FTC, whereas earlier it had to be filed by the due date of the original ITR. Tanna emphasized that "the core point to be seen is that the salary income per se received in Australia for services rendered in Australia is not taxable at all in India in the hands of the assessee in view of Article 15 of India-Australia DTAA." The ruling serves as a reminder that taxpayers with overseas income should carefully determine whether the income is taxable in India under the applicable DTAA before reporting it in their ITR.
