Tax Residency Certificate in India is essential for anyone seeking relief under Double Taxation Avoidance Agreements. It confirms your tax status in India. Moreover, it helps you claim lower tax rates on foreign income. Let’s See more about this.
What Is a Tax Residency Certificate?
A Tax Residency Certificate (TRC) is an official proof issued by a country’s tax authority that confirms your tax residency for a particular year. In India, TRCs are used mostly by non-resident taxpayers to claim benefits under the Double Taxation Avoidance Agreement (DTAA).
Common details on a TRC include: name, taxpayer status, nationality, tax identification number, address, and period of residency. Without this certificate, NRIs might face higher tax deduction at source (TDS) under domestic Indian tax rules.
Why Is a TRC Important?
A TRC offers several key benefits:
- Avoids double taxation: By proving tax residency, you can claim relief under a DTAA rather than being taxed by both countries.
- Reduces withholding tax (TDS): When you submit a TRC to your payer in India (such as a bank, employer, or company), you may get taxed at lower treaty rates instead of the standard higher domestic rates.
- Regulatory compliance: A valid TRC is often mandatory for Form 15CB (certificate from a chartered accountant) and other treaty-related filings.
Importantly, the TRC must be accompanied by Form 10F, which gives additional information like your status, nationality, TIN, and period of stay. As per Section 90(4)/90A(4) of the Income Tax Act, you need both TRC and Form 10F to claim treaty benefits
The Application Process for TRC:
To apply for a Tax Residency Certificate in India, you must submit Form 10FA to your Assessing Officer (AO) using the income tax portal. You will also need to submit:
- Proof of address (utility bills, rental agreement)
- Passport or national ID
- Tax returns or proof of income
- A request letter addressed to the assessing officer requesting the TRC.
- Upon verification, the tax office issues Form 10FB, which is your Tax Residency Certificate. TAXAJ.
- Note that TRC in India is valid only for the financial year, so you must renew it annually.
Legal & Compliance Aspects:
Under Indian law, Sections 90(4) and 90A(4) of the Income Tax Act mandate a TRC from non-residents to claim DTAA relief. Also, tax authorities may ask for Form 10F details along with TRC. This form provides nationality, address, tax identification, and purpose.However, in rare cases, tribunals have ruled that even without a TRC, treaty benefits may be granted if there is reasonable proof of residency.
Common Pitfalls to Avoid:
- issing Form 10F: Even with a TRC, not submitting Form 10F may disqualify you from DTAA benefits.
- Expired certificate: Since TRCs are valid only for a financial year, don’t let the validity lapse if you need it again.
- Incorrect format or language: Some countries issue TRCs in their native language; always get an English version if needed.
Conclusion:
A Tax Residency Certificate (TRC) in India is not just a formality. It powers your access to tax treaty benefits, helps you avoid double taxation, and reduces TDS on international income. Without it, you risk paying more than necessary. Whether you’re an NRI earning rental income, a returning Indian with foreign salary, or a foreign company receiving fees from India — get your TRC before the income is paid. One certificate, zero hassle, maximum savings!
– Ketaki Dandekar (Team Arthology)
Read more about Tax Residency Certificate (TRC) here – https://cleartax.in/residency-certificate