Complete Overview of Tax Residency Certificate (TRC)

What is the Tax Residency Certificate (TRC)?; Tax Residency Certificate; Tax Residency Certificate

With effect from 1st April 2013, A person residents of India who receive income from countries with whom India has a Double Taxation Avoidance Agreement can acquire a tax residence certificate from the Department of Income Tax. The same can be sent to the payer for the Double Taxation Avoidance Agreement benefit. Double Taxation Avoidance Agreement can acquire a tax residence certificate from the Income Tax Department. The same can be sent to the payer for the DTAA benefit.

The government has now issued notification No. NOTIFICATION No 39/2012, DATED 17-9-2012, published the following forms, which shall apply w.e.f 1st April 2013 and onwards:-

  • FORM No. 10FA – Filling an Application for a Certificate of Residency according to Sections 90 & 90A of the IT Act, 1961
  • FORM No. 10FB – Get the TRC for the purposes of Sections 90 and 90A of the IT Act 1961,

In order to receive a certificate of residency for the purposes of the arrangement referred to in Section 90 and Section 90A, the assessee, being a resident of India, shall make an application to the assessing officer in Form No. 10FA.

The AO shall, upon receipt of the application referred to in sub-rule (3) and fulfilled in that regard, grant the certificate of residency for the assessee in Form No. 10FB.

Kind of Abroad income to which the Double Taxation Avoidance Agreement applies: 

Here are the various kinds of foreign income that DTAA refers to:

  1. Income from Interest on FD
  2. capital gains on the selling of property
  3. Lease of assets
  4. Salary-Income from India is to be filed in form 1040 of the tax return. If you receive a tax credit, please fill out Form 1116. or  Income from Salary earned in foreign countries
  5. Agricultural revenue
  6. Share and mutual fund dividends
  7. Any income earned for freelance or consultancy work in India
  8. Interest in bank deposits, as well as other securities held in India and Income, earned as Interest on Savings bank Account
  9. Income from Capital income gained in foreign countries

Tax Residency Certificate for claiming relief under an agreement referred to in sections 90 and 90A is specified under rule 21AB of the Income Tax Rules.

Tax Residency Certificate needed to be acquired by non-residents: the new law specified that the TRC should be acquired by a non-resident from the Government of the country or designated territory of which he/she is resident and should include the following information:

  • Name of the taxpayer.
  • The status of the assessee (individual, corporation, firm, etc.)
  • Citizenship (in the case of individuals)
  • Country or designated territory of incorporation or registration;
  • The tax identification number of the assessor in the country or designated territory of residence or, in the event that such number does not exist, the specific number on the basis of which the person is known by the Government of the country or designated territory of residence.
  • Residential status for tax purposes as specified in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A, is applicable;
  • The period of validity of the certificate
  • Address of the assessee for the period of validity of the certificate

Steps/Process to be followed to acquire Tax Resident Certificate (TRC) in India

In this situation, a completely manual procedure is implemented.

You can need to visit the Office of the Assessing Officer (AO) at least 2-3 times.[Rule 21AB]

Step 1: Find your appraisal officer online via the e-filling website by entering the PAN and the registered mobile number. [Left corner of the page under the Quick Link tab]

Step 2:

  • Create a document describing your travel in and out of India with a stamped passport.
  • In the circumstance of an electronic check-in or check-out via smart gates, and air ticket should be saved to clarify to the Evaluating Officer. [Happens primarily in the UAE]
  • Add days in a foreign land and make your stay in Indian soil transparent for the remaining number of days in the financial year.; TRC; TRC

Step 3:

  • Download Form 10FA and send the completed form to the appraisal officer (AO).
  • It is clear that the object of the tax resident certificate is revealed. Example: to subtract the sum of the tax withheld from the income earned abroad. [Form 10FA of paragraph (x) of 2]
  • Attach a copy of the passport and display all the arrival and departure stamps as shown in step 2.

 Step 4:

  • The Assessing Officer (AO) may ask you to visit his office to discuss your application.
  • The satisfaction of the Assessing Officer is required to receive the Tax Resident Certificate (TRC).
  • Upon being assured, TRC will be provided in Form 10FB.

Tax Residency Certificate required to be obtained by residents of India:

A resident taxpayer can send an application to the Assessing Officer (‘AO’) in Form 10FA to acquire a TRC in India. According to the provisions of sub-rule (2), for the purposes of  Section 90(5) and Section 90A(5), the following details shall be given by the assessee in Form No. 10FB:—

  • The status of the assessee (individual, corporation, firm, etc.)
  • Name of the assessee (taxpayer)
  • E-mail Address
  • Permanent Account Number / Tax Deduction Account Number (where applicable)
  • Citizenship (in the case of individuals)
  • The basis on which the status of resident in India is asserted
  • Purpose to receive the Tax Residency Certificate
  • The period of validity of the certificate
  • Address of the assessee for the period of validity of the certificate
  • Some more information

The application form, along with supporting documentation, must be sent to the Assessing Officer. The New Rule specifies that, upon receipt of the application and on the fulfillment of the particulars found therein as in sub-rule(3), the Assessing Officer shall grant the Tax Residency Certificate to the resident taxpayer in Form 10FB.

How to get the Form 10FB Indian Tax Resident Certificate-

Impacts/ advantages of the Tax Residency Certificate:

  • In order to prevent foreign tax deductions, all Indian residents are expected to apply a resident tax certificate to their foreign tax authorities.
  • Indian citizenship is not applicable to this certificate. This can also be acquired by a foreign national such that he fulfills the required requirements.
  • The specified format would make it possible for international residents to know in advance what is appropriate to receive tax credits. This would speed up the whole payment process.
  • The Tax Residency Certificate provision gives the tax authorities the right to test the tax beneficiary under these treaties.
  • In this post, we will discuss different aspects of the tax-resident certificate and the process by which it may be issued.
  • Save the tax!

How to get TAX Relief through TRC

TRC & TIN are required to claim exemption from higher withholding tax

  • Tax Residency Certificate and Tax Identification Number to demand exemption from higher TDS (for those who do not have PAN) u/s 206AA of the I Tax Act
  • CBDT brings additional Rule 37BC providing for information to be provided by a non-resident payee for relief from tax deduction at a higher percentage u/s 206AA of the I Tax Act
  • Latest Rules specifies that a non-resident deductee is not subject to the high tax on payments of ROYALTY, INTEREST, Charge FOR TECHNICAL SERVICES AND TRANSFER OF CAPITAL ASSETS,
  • In addition, it was stated that in the case of a deductee protected by current Rules 37BC, “PAN NOT AVAILABLE” should be indicated in Form 27Q when filing the TDS return.

What happens when non-residents do not have Tax Residency Certificate?

TRC from a non-resident or a foreign person for the purpose of getting advantages the DTAA/tax treaty

In cases where non-residents must provide Tax Residency Certificate or delays occur, the paying entity can withhold taxes at higher rates instead of applying the beneficial provisions of the Treaty. In that scenario, a non-resident will have to apply for refunds in India by filing his Income-tax Returns.

Even in cases of net financial dealings where the tax is paid by the Indian individual, they will have to look for consideration of those specifications.

Few Basic Question and Answer on TRC

S. No. Questions answers.
i if in addition to the tax residence certificate, the development of other fair proof is required for proper compliance with the residence test Yes
ii if the creation of other reasonable facts, even without a tax residence certificate, providing proof of residence of the payer would make the payer liable for the benefit of the Treaty? Yes
iii Does this indicate that the Tax Residency Certificate is just one of the proofs, but not definitive proof of the residence of the payer? Yes
iv if the tax residence certificate of the payer U/S 90(4) is a necessary condition for the payer to be qualified for the benefit of the Treaty? No
v Whether the generation of the Tax Residency Certificate by the payer alone is appropriate No

To reach the conclusion:

therefore before paying to non-residents or foreign organizations, it is compulsory to the corresponding non-residents for a tax residence certificate in order to benefit from the tax treaties. Besides that, instead of asking for the specified details in the Tax Residency Certificate itself, the government can now apply for the same data independently by other information and documents. This is a good development as investors from some countries have been faced with a problem because their governments have declined to change the Tax Residency Certificate format simply to fulfill the standards of the Indian Government. International investors are and will continue to be an important part of Indian markets. Steps must be taken to ensure that the flow of FDI continues to rise in India.

For complete solution and find out the complete answer of the following question you may contact us on 9555 5555 480

  • Whom to apply for Tax Residency Certificate and How to apply for Tax Residency Certificate?
  • Is there any form of application?
  • Is there any time limit for the issue of a Tax Residency Certificate?
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