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Tax Residence Certificate (TRC).

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June 16, 2022 |

17 mins read

Tax Residence Certificate (TRC)

When a non- resident, who is liable to pay tax in India, wants to claim the benefit of a Double Taxation Avoidance Agreement (DTAA”) entered into between India and his country of residence, the Income Tax Authorities want to determine,  whether the non-resident is a bona fide tax resident of the particular State (i.e. Country), whose benefit he intends to claim. To evaluate this aspect, the Indian tax authorities evaluate this aspect for which, the non-resident is required to provide  a Tax residence certificate from the Government of the respective country, (TRC) for which a Double Tax Avoidance Agreement (DTAA)  has  been signed by India with another country or defined territory.

Index

What is Tax residency certificate (TRC)

A Tax residency certificate (TRC) , is a document issued by the tax authorities of the country of the Non-resident, affirming that the NR is a resident of that country for the tax year in question for DTAA applicability, and is eligible to claim the benefit of the Tax Treaty .

Importance of Tax Residency Certificate

An Indian resident has to pay tax on its global income i.e. the Income earned in foreign country by an Indian resident is liable to pay tax on the same income in India also. Therefore, he is paying tax twice on the same income.

To provide relief from double taxation on the same income, the Government of India may enter into Double Taxable Avoidance Agreement (DTAA) with the governments of other countries and if required, made alteration/modification in DTAA accordingly.

To claim the benefits of DTAA, a taxpayer has to obtain Tax Residency Certificate (TRC) from the Government of the country or specified territory of his residency.

Types of Income covered

  • Revenues earned from services provided in Foreign country
  • Salary earned in Foreign country
  • Revenue from assets in the Foreign country
  • Capital Gain earned on transfer of property situated in Foreign country
  • Interest on Fixed deposit
  • Interest on Saving bank account
  • Income on agriculture of agriculture produce earned in Foreign country
  • Dividends received on Share and other Fund

TRC Certificate under Income Tax Act 1961

An assessee, who is a non-resident, and intends to claim the benefit of DTAA between India and his country of residence, shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident in any country outside India or specified territory outside India, is obtained by him from the Government of that country or specified territory.

How to Obtain a Tax Residence Certificate – Form 10FA

An assessee who is a resident of India , can apply to the Assessing Officer for a Tax Residency Certificate in Form No. 10FA under rule 21AB t, o claim relief under a DTAA. The Assessing Officer shall give the assessee a certificate of residency in Form No – 10FB upon receipt of an application and after being satisfied on the particulars mentioned therein.

TRC for Indian Resident Taxpayer

The resident of India earning income from other countries with which India has a DTAA can obtain a TRC from the Income Tax Department of India. A person is required to make an application in Form No. 10FA before the Assessing Officer to obtain TRC. The Assessing Officer on receipt of such application and on being satisfied in this regard may issue a TRC in Form No. 10FB.

TRC for Non-Resident Taxpayer

A Taxpayer who is a Non-Resident as per the Indian Income Tax Law, may obtain a TRC from the government of the country or the specified territory of which he is a resident. The following details must be there at the time of application of TRC :-

  • Taxpayer’s name;
  • Taxpayer’s status (i.e. individual, company, firm etc.);
  • Nationality in case of individual or country/specified territory of incorporation or registration in case of a company, LLP, Firm or others;
  • Tax identification number or Unique number of taxpayer as per the country or specified territory of residence based on which the person is recognised as a resident by such country’s government or the government of a specified territory;
  • Taxpayer’s residential status;
  • Period during which the certificate is valid; and
  • Taxpayer’s address for the period for which the certificate is applicable.

The above information alongwith additional information if required to be submitted in Form 10F by the Non-resident taxpayer, also advisable to keep and maintain such documents to substantiate the information provided in Form 10F. Sometimes the income-tax authority may require the person to provide the said documents for its verification.

Tax Residency Certificate Format

In case Assessing Officer approved the application for the certificate of residency shall issue a Certificate of residence / TRC in Form No. 10FB. Below the format of TRC issued by Assessing Officer :-

 

FORM NO. 10FB
[See rule 21AB (4)]
Certificate of residence for the purposes of section 90 and 90A

1. Name of the Person ________________
2. Status    ______________
3. Permanent Account Number _______________________
4. Address of the person during the period of ________________

Tax Residency Certificate

Certificate

It is hereby certified that the above mentioned person is a resident of India for the purposes of Income-tax Act, 1961.
This certificate is valid for the period __________________
Issued on __________ the day of ________, ________.

Name of the Assessing Officer
Designation____________
Seal ______________

Form 10F

FORM NO. 10F

[See sub-rule (1) of rule 21AB]

Information to be provided under sub-section (5) of section 90 or

sub-section (5) of section 90A of the Income-tax Act, 1961

I, ________________ *son/daughter of Shri _____________, in the capacity of _________________ (Designation) do provide the following information, relevant to the previous year ________________ in my case/in case of ________________ for the purposes of sub-section (5) of section 90/section 90A :-

Sl.No. Nature of information Details #
(i) Status (individual, company, firm etc.) of the assesse
(ii) Permanent Account Number (PAN) of the assessee, if allotted  
(iii) Nationality (in the case of an individual) or Country or specified territory of incorporation or registration (in the case of others)  

 

(iv) Assessee’s tax identification number in the country or specified territory of residence and if there is no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which the assessee claims to be a resident
(v) Period for which the residential status as mentioned in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A is applicable
(vi) Address of the assessee in the country or territory outside India during the period for which the certificate, mentioned in (v) above, is applicable

 2. I have obtained a certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A from the Government of __________________ (name of country or specified territory outside India).

Signature : __________________

Name : __________________

Address :__________________

Permanent Account Number or Aadhaar number : __________________

Verification

I, __________________ do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.

Verified today the __________ day of _____________.

Signature of the person providing the information

Place: ______________

Notes :

  1. Delete whichever is not applicable.
  2. Write N.A. if the relevant information forms part of the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A.

A non-resident, who intends to claim the benefit of Indian Treaties with their country of residence, is required to provide information in Form 10F  – Information to be provided under sub-section (5) of section 90 or sub-section (5) of section  90A of the Income-tax Act, 1961

Particulars required in Form 10F

To acquire a TRC Certificate, an assessee must give the following information in Form No. 10F, as per Rule 21 AB.

  1. Status (individual, company, firm, etc.) of the assessee
  2. Nationality (in case of an individual) or country or specified territory of incorporation or registration (in case of others)
  3. Assessee’s tax identification number in the country or specified territory of residence and in case there is no such number, then, a unique number based on which the person is identified by the Government of the country or the specified territory of which the assessee claims to be a resident
  4. Period for which the residential status, as mentioned in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A, is applicable
  5. Address of the assessee in the country or specified territory outside India, during the period for which the certificate, as mentioned in (iv) above, is applicable.

Rule 21AB also provides that the assessee may not have to give the information mentioned above, if such information or part of it is in the Tax Residency certificate .

Also, the assessee is required to keep and maintain any documents to back up the information given in the TRC Certificate application, which can be verified by the  income-tax authority .

Advantages of  Tax Residency Certificate

  • An Indian resident has to apply for tax residency certificate to foreign tax authorities in order to prevent foreign tax deduction
  • An Indian citizenship is not required to apply for TRC. A foreign citizen is required to apply TRC
  • To speed up the payment process, a format has been decided to make it possible for foreign residents to know the process to receive tax credits
  • With the help of TRC, tax authorities has the right to check the genuineness of the beneficiary

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

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FAQs

1. What is Tax Residency Certificate ?

A document issued to claim the benefit of the Tax Treaty by the tax authorities of the country of the Non-resident, affirming the residency status NR.

2. Who can apply for TRC in Form 10F and 10FA ?

An assessee who is a resident of India , can apply to the Assessing Officer for a Tax Residency Certificate in Form No. 10FA under rule 21AB to claim relief under a DTAA. However, a non-resident, who intends to claim the benefit of Indian Treaties with their country of residence, is required to provide information in Form 10F

3. Whether Form 10FA for TRC be filed online ?

To submit Form 10 FA, a citizen or resident have to take this form from the Assessing Officer of the country in which you are applying for TRC. The Form 10 FA can’t be submitted online in India.

4. Where to submit Form 10 FA ?

The Form 10FA can be filed before the jurisdictional Assessing Officer (‘AO’) for getting a TRC in India.

5. In which Form the Assessing Officer provides TRC?

The Assessing Officer shall give the assessee a certificate of residency in Form No – 10FB upon receipt of an application and after being satisfied on the particulars mentioned therein.