/ INCOME TAX

Overview on Tax Residency Certificate (TRC) for Indian & Non-Resident

Overview on Tax Residency Certificate (TRC) for Indian & Non-Resident.

Tax Residency Certificate

A Tax Residency Certificate is a document issued by a country’s Income Tax Authority certifying that a person or company is a Tax Resident (for taxation purposes) of that country. The purpose of a Tax Residency Certificate is to determine which country you belong to and whether or not you are a tax resident. It may be necessary if you earn money in more than one country. You may be a taxpayer of any one of them but, because of your particular internal laws, the country may pay for your profit. You can use the Double Taxation Avoidance Agreement (DTAA) within the countries to avoid paying tax on the same income twice. TRC assists in determining where nation you are from and whether you are a tax citizen, so that the appropriate DTAA may be applied to you and you can take advantage of the benefits reported internally.

Cross-country transactions are taxed in accordance with the provisions of the respective country’s Income Tax Law and the provisions of a Double Taxation Avoidance Agreement (DTAA) decided to enter into between two countries. Because the provisions of the DTAA apply exclusively to residents of that country, the Income Tax Authorities of the country where the revenue is generated require a Tax Residency Certificate from the revenue recipient in order to provide the benefits provided under the DTAA between the two countries.

In the Union Budget 2021, NRIs expect some government tax relief to be tabled on 1 February 2021. They want a minimum income threshold set by the government to obtain a NRIs tax residency certificate. Small transactions would be relieved.

Do you find it difficult to receive a certificate of tax residence? They can be received by presenting the 10FA Form. This form defines the Certificate of Residence statement for an agreement under sections 90 and 90A of the Income-tax Act of 1961.

Form of certificate of residence:

The format of the certificate of residence document that Polish taxpayers must present in the event of a tax inspection is also problematic. Taxpayers should obtain a printout of an original document, according to tax authorities. Notarial certification is required for all copies. Such documents may also be in the form of a computer file if issued in that format by the tax administration of the country of residence (and preferably provided with an electronic signature). Despite the fact that this is the simplest form for taxpayers, tax offices frequently question copies of certificates of residence obtained via e-mail or from websites.

Validity of certificates of residence:

Regulations that have been in effect since 2015 were intended to remove doubts about the expiration date of certificates of residence with no specified validity period. According to current regulations, such certificates are valid for 12 months from the date of issue. As a result, if a foreign counterparty changes its registered office and fails to notify its Polish counterparty, no additional tax is due from the Polish business. This principle does not apply if, e.g. from the facts received from that counterpart, the Polish taxpayer has heard about changing the registered office address.

Relevant declarations that prevent the collection of tax:

Furthermore, dividends, interest, and licence fees paid to foreign capital group companies may be tax exempt if relevant statements are obtained from counter parties. Depending on the type of payment and capital relationship with the Polish company, the current law allows for a variety of statements to be obtained.

More information about the exemption of dividends, interest, and licence receivables from withholding tax, as well as the planned amendments, can be found here.

Certificate of Tax Residence in India process:

In order to apply for tax relief in accordance with Double Tax Avoidance Agreements, a person must have a tax residence Certificate document. The document is issued by your country of residence and is only provided to those other countries with which the DTAA agreement is entered into in the home country.

In India, the certificate is issued by the Department of Income Tax. You can go through the following points to understand the criteria of being a resident in India. A person is reported to be a resident.

  • When they stay in India in the previous year for 182 days or more.
  • If they stay in the current financial year for 60 or more days in India and stay for 365 or more days in the previous four years.

The evaluating officer should apply for compliance with the agreement requirements referred to in paragraphs 90 and 90a in Form No. 10FA. When the appraising officer receives the application referred to in sub-Rule (3), he shall satisfy himself by examining the submitted documents. The officer will issue the assessee’s certificate on complete compliance.

Instead of 182 days, a lower limit of 120 days applies when an NRI revenue from Indian sources is more than Rs 15 lakh in the financial year concerned. The 182-day threshold will continue to apply where the Indian taxable income of an NRI is less than Rs 15 Lakh.

Types of Foreign Income Covered by the DTAA:

The following are the various kinds of foreign income that DTAA applies to:

  • Fixed deposit interest.
  • Foreign country capital gains.
  • Revenue from property lease.
  • Revenues earned by independent work or consulting.
  • Saving bank account interest.
  • The Foreign Country received salary.
  • Agricultural income.
  • Dividends for Share and Common Fund

A tax residency certificate is required under Rule 21AB of the Income Tax Act to claim tax relief pursuant to the agreement referred to in Articles 90 and 90A.

Rresident Taxpayer can obtain a TRC by filing an application in Form 10FA

As per Indian tax regulations, a resident taxpayer can obtain a Tax Residency Certificate (TRC) by filing an application in Form 10FA with the Assessing Officer (AO). Upon verification, the AO will issue the TRC in Form 10FB.

Documents Required for Filing Form 10FA:

The following details must be furnished:

  • Full name and address of the assessee
  • Status (Individual, HUF, Firm, Company, etc.)
  • Nationality (for individuals)
  • Country of incorporation/registration (for entities)
  • Address during the period for which TRC is required
  • Email ID
  • PAN/TAN (if applicable)
  • Basis for claiming resident status in India
  • Period for which TRC is applicable
  • Purpose of obtaining TRC
  • Any other details required by the AO

The application form, along with supporting documents, must be submitted to the AO, who will issue Form 10FB upon satisfaction of the details provided.

Submission of TRC & Form 10F for Non-Residents

  • We previously assisted multiple foreign companies in successfully completing Form 10F (valid from April 1, 2024, to March 31, 2025). Under Section 90(5) and 90A(5) of the Income-tax Act, 1961, non-residents receiving payments from India must submit both the Tax Residency Certificate (TRC) and Form 10F to claim DTAA benefits.
  • Although Section 90 does not explicitly specify the exact timing for submitting TRC & Form 10F to Indian tax authorities, it is a pre-condition under Section 90(4) and 90(5) that non-residents must provide these documents to avail DTAA benefits. If a payer applies DTAA provisions while making payments to a non-resident without obtaining TRC & Form 10F, they may be considered an assessee in default, leading to tax consequences. Taxpayer make ensure timely submission of TRC and Form 10F to avoid any compliance issues.

Non-resident Indian Tax Residence Certificate:

The tax registration certificate should be obtained from the government or the territory on which the assessee is a non-resident in India. The following information is given in this certificate.

  • Name of assessee
  • Status (Individual/ HUF/Company)
  • Nationality (in case of an individual)
  • The country or the particular registration territory.
  • Income tax residential status.
  • The address specified for the certificate validity.
  • The Tax Identification number in the country or territory specified or, if TIN is unavailable, a unique identification number of the Government of that territory.

The asseessee shall provide all of the above information in Form 10F.

For the authenticity of the assessee in the tax system, the certificate referred to in sub-rule (1) must be verified by the state government or by the noted territory.

Subject to the provisions of sub-rule (2), an assessee should provide the information listed below in Form 10F for sub-section (5) of section 90A and sub-section (5) of section 90.

  • Status (HUF/ Individual/ Company)
  • In the case of an individual, nationality; in the case of any person other than an individual, the country or area of registration.
  • The period of residence status.
  • Assesses address in India or a territory outside India during the period for which the certificate is valid.
  • The assessee’s TIN in the country or territory of residence. If the TIN is not available, the unique number used to verify a person’s identity in the specified region is used.

If the information or any part of it is already mentioned in the certificate referred to in sub-section (4) of section 90A or 90, there is no need to provide it.

The assessee must keep the documents required to substantiate the provided rule under sub-section (1), and the Income-Tax authorities must provide said documents regarding claims for any type of relief under an agreement referred to in sub-section (1) of sections 90A and 90.

**********************************************************

If this article has helped you in any way, i would appreciate if you could share/like it or leave a comment. Thank you for visiting my blog.

Legal Disclaimer:
The information / articles & any relies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do noy constitute legal advice or legal opinions. The information / articles and any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, i can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information / articles contained without first seeking the advice of a practicing professional.