Declared Australian salary in Indian ITR by mistake? Delhi ITAT says it can't be taxed under DTAA

A Delhi taxpayer who mistakenly reported his Australian salary as taxable income in his Indian income tax return (ITR) has won partial relief from the Income Tax Appellate Tribunal (ITAT). The Tribunal held that the salary earned in Australia for services rendered there cannot be taxed in India under the India-Australia Double Taxation Avoidance Agreement (DTAA). However, it also ruled that since the income is not taxable in India, the taxpayer cannot claim a foreign tax credit (FTC) for the taxes paid in Australia.

How the mistake happened

The case involved Mr. Gupta, a resident of IP Extension, Delhi, who worked in Australia during the relevant financial year and earned a salary of ₹14.16 lakh from an Australian employer. Since he spent the entire year in Australia and performed all his employment duties there, the salary was taxable only in Australia under Article 15 of the India-Australia DTAA.

However, while filing his income tax return for Assessment Year (AY) 2020-21 on September 29, 2020, Gupta inadvertently included the Australian salary in his taxable income in India.

The salary had already been taxed in Australia, where ₹3.40 lakh was deducted as tax. After realizing the error, Gupta filed Form 67 to claim a Foreign Tax Credit (FTC) and sought rectification under Section 154 of the Income Tax Act, requesting that the Australian salary be excluded from his Indian taxable income.

CPC rejected rectification request

The Centralised Processing Centre (CPC), Bengaluru, rejected Gupta's rectification application. Aggrieved by the decision, he challenged the order before the Commissioner of Income Tax (Appeals) and subsequently approached the Delhi ITAT.

Represented by Chartered Accountant Vinod Bindal, Chartered Accountant Rinky Sharma, and Advocate Amol Jha, Gupta argued that Article 15 of the India-Australia DTAA clearly provides that salary is taxable only in the country where the employment is exercised. Since the services were rendered entirely in Australia, India had no right to tax the income.

What the ITAT ruled

In its order dated June 30, 2026, the Delhi ITAT accepted the taxpayer's contention. It directed the Assessing Officer to exclude the Australian salary from Gupta's total income, observing that the salary received in Australia for services rendered there "is not taxable at all in India in view of Article 15 of India-Australia DTAA."

However, the Tribunal also clarified that Gupta would not be entitled to claim the Foreign Tax Credit of ₹3,40,428. Since the salary itself is not taxable in India, there is no Indian tax liability against which the foreign tax paid can be adjusted.

Form 67 rules

Tax experts note that the rules for claiming Foreign Tax Credit have become more taxpayer-friendly in recent years.

Mihir Tanna, Associate Director at S.K. Patodia LLP, told the Economic Times that the Income Tax Department amended the rules through Notification No. 100/2022, allowing taxpayers to submit Form 67 up to the end of the relevant assessment year from FY 2022-23 onwards. Earlier, the form had to be filed on or before the due date for filing the original ITR. Tanna also pointed out that several judicial rulings have held that the timeline for filing Form 67 is directory rather than mandatory, providing greater flexibility to taxpayers claiming foreign tax credit.