Tax Residency Certificate (TRC) — What It Is and How to Obtain It

Tax Residency Certificate (TRC) — What It Is and How to Obtain It

A Tax Residency Certificate (TRC) is the documentary proof of tax residency in a particular country that enables individuals and entities to claim benefits under a Double Taxation Avoidance Agreement (DTAA) between two countries. India has signed DTAAs with over 90 countries, and these agreements significantly reduce — or in some cases eliminate — the withholding tax on income paid across borders: dividends, interest, royalties, fees for technical services, and capital gains. However, claiming DTAA benefits in India is not automatic. Under Section 90(4) of the Income Tax Act, 1961, a non-resident cannot claim treaty benefits unless they furnish a valid Tax Residency Certificate issued by the competent authority of their home country. Without a TRC, Indian payers must deduct TDS at the higher domestic rate, not the reduced DTAA rate.

N D Savla & Associates, Chartered Accountants based in Mumbai, assists non-residents in obtaining and submitting Tax Residency Certificates for DTAA benefit claims in India, and assists Indian residents in obtaining TRCs from the Indian tax authority (in Form 10FB, applied for in Form 10FA) for use in foreign countries where they have income. Our international tax team understands the TRC requirements under each major DTAA India has signed, the Form 10F self-declaration procedure that accompanies TRC submissions in India, the Multilateral Instrument (MLI) provisions that have modified several key DTAAs, and the Principal Purpose Test (PPT) that the Income Tax Department now applies to DTAA benefit claims. We also handle all related TDS Return Filing compliance for Indian companies that pay income to non-residents and must verify TRC and Form 10F documentation before applying reduced DTAA withholding rates.

The Tax Residency Certificate is a document that sits at the intersection of international tax law, domestic income tax compliance, and bilateral treaty policy. An Indian company that makes a royalty payment to a US parent without obtaining the parent's TRC must deduct TDS at 25% + surcharge under domestic law instead of 15% under the India-US DTAA — a significant difference in cash flow. A Singapore-based fund that wants to claim exemption from Indian capital gains tax on its Indian equity investments needs both a Singapore TRC and, since the MLI amendments, must also be able to demonstrate that its Singapore presence is not driven primarily by the purpose of obtaining DTAA capital gains exemption. The Tax Residency Certificate is where international taxation, treaty policy, and day-to-day compliance intersect — and where N D Savla & Associates provides hands-on advisory and compliance support. All applications for India-issued TRCs are filed on the income tax portal at incometax.gov.in.

What Is a Tax Residency Certificate?

A Tax Residency Certificate (TRC) is a document issued by the tax authority of a country certifying that a particular individual or entity is a tax resident of that country for the purposes of the relevant Double Taxation Avoidance Agreement. The TRC provides the evidentiary foundation for the DTAA benefit claim: it establishes that the claimant is resident in a DTAA partner country and is therefore entitled to the benefit of the reduced withholding tax rate, exemption, or other treaty provision available to residents of that country.

Tax Residency Certificates serve two distinct purposes depending on the direction of the income flow:

TRC for Non-Residents Claiming DTAA Benefits in India

When a non-resident receives income from India — dividends, interest, royalties, fees for technical services, or capital gains on Indian investments — they are subject to Indian withholding tax (TDS) on that income. Under most DTAAs, the withholding rate on such income is reduced from the domestic rate. For example, under the India-UK DTAA, interest paid to a UK resident is taxed at 10% instead of 20% under domestic law; under the India-Germany DTAA, fees for technical services are taxed at 10% instead of 25% under domestic law.

To claim these reduced rates, the non-resident must:

• Obtain a Tax Residency Certificate from the competent authority of their home country (the UK's HMRC, Germany's Bundeszentralamt für Steuern, the US IRS, Singapore's IRAS, etc.)
• Submit the TRC to the Indian payer (the Indian company, bank, or other entity paying the income)
• Submit a self-declaration in Form 10F (online, on the income tax portal) if the TRC does not contain all particulars required under Rule 21AB of the Income Tax Rules
• The Indian payer then verifies the TRC and Form 10F, and deducts TDS at the applicable DTAA rate rather than the domestic rate

TRC for Indian Residents Claiming DTAA Benefits Abroad

When an Indian resident — an individual, a company, an LLP, or any other entity — receives income from a foreign country and wants to claim DTAA benefits in that country (such as a reduced withholding rate on dividends received from a foreign subsidiary, or credit for foreign tax paid), the foreign tax authority may require proof that the income recipient is a tax resident of India. The Indian tax authority — through the competent authority designated under each DTAA, typically the Commissioner of Income Tax (International Taxation) — issues a Tax Residency Certificate in Form 10FB confirming that the applicant is a resident of India for the purposes of the applicable DTAA. The application for this certificate is filed in Form 10FA on the income tax portal. Our Business Tax Filing service includes TRC application assistance for Indian companies that need to claim treaty benefits in their overseas operations.

Form 10F — Self-Declaration to Accompany the TRC

Rule 21AB of the Income Tax Rules, 1962 prescribes specific particulars that a TRC must contain to be valid for DTAA benefit claims in India. If a TRC issued by a foreign tax authority does not contain all these particulars (such as the taxpayer's address in the home country for the relevant period, or the applicable period of the certificate), the non-resident must supplement the TRC with a self-declaration in Form 10F. Form 10F is filed online on the income tax portal at incometax.gov.in by the non-resident — non-residents who do not have a PAN were, from September 2022, required to obtain PAN for filing Form 10F online, creating significant compliance burden for one-time non-resident payees. The CBDT has from time to time provided relaxations for non-residents without PAN, but the general requirement remains that Form 10F must be filed for every year of claim.

When Is a Tax Residency Certificate Required for DTAA Benefits?

A TRC is required whenever a non-resident wants to claim a DTAA benefit on income received from India that would otherwise be taxed at domestic rates. The most common situations are:

Dividend Income Under DTAA

Dividends paid by Indian companies to non-resident shareholders are taxed at 20% under domestic law (Section 115-O abolished, DDT removed from AY 2021-22, dividends now taxable in hands of recipient). Under most DTAAs, the dividend withholding rate is reduced — typically to 10–15% for substantial holdings (parent-subsidiary dividends) or 15–25% for portfolio dividends. A non-resident shareholder in an Indian company must furnish a TRC to claim the reduced DTAA rate. Without TRC, the Indian company must deduct TDS at 20% + surcharge + cess on all dividends paid to the non-resident.

Interest Income — NRO Accounts, Bonds, and Debentures

Interest paid to non-residents on NRO fixed deposits, external commercial borrowings (ECBs), bonds, debentures, and other debt instruments is subject to TDS at 30% (for NRO interest, applicable to NRIs from most countries) or 20% (for corporate debenture interest) under domestic law. Under DTAAs with countries like the UK, Germany, Japan, and the US, the interest withholding rate is reduced to 10–15%. Banks and companies that pay interest to non-residents and apply the DTAA reduced rate must collect and maintain TRC and Form 10F from each non-resident payee.

Royalties and Fees for Technical Services (FTS)

Royalties paid to foreign companies for use of patents, trademarks, software, and other intellectual property, and fees paid for technical services (FTS) provided by foreign entities, are taxed at 25% under domestic law (Section 115A). Under most DTAAs, these rates are reduced to 10–15% for royalties and 10–20% for FTS. For Indian companies making regular payments to foreign technology providers, equipment lessors, or IP licensors, obtaining and maintaining current TRCs for each payee is an ongoing TDS Return Filing compliance requirement. The Indian company's quarterly TDS return must correctly reflect the DTAA rate applied and confirm that TRC was obtained.

Capital Gains on Indian Investments

Capital gains on sale of Indian securities, property, or other capital assets by non-residents are subject to Indian capital gains tax under domestic law. Several DTAAs — notably the now-amended Mauritius and Singapore DTAAs, and the existing Cyprus DTAA (grandfathered) — provide for exclusive taxation of capital gains in the country of residence of the seller, exempting the gains from Indian tax. To claim this treaty-based capital gains exemption, the non-resident must furnish a TRC from the relevant country. However, following the MLI amendments and the Principal Purpose Test, the mere existence of a TRC no longer guarantees the capital gains exemption for investments set up primarily to benefit from the treaty.

Salary and Employment Income Under DTAA

Foreign nationals working in India who are residents of a country with which India has a DTAA may be entitled to exemption from Indian income tax on their salary for short visits to India (typically stays of 183 days or less in a 12-month period, depending on the specific DTAA provision). To claim this employment income exemption, the foreign national must furnish a TRC from their home country. The Indian employer must collect the TRC and Form 10F, and may refrain from deducting TDS on the salary if the DTAA exemption conditions are established.

Technical Assistance and Managerial Services

Payments made by Indian companies to foreign holding companies or related parties for management fees, technical assistance, administrative support, or shared services are often structured as FTS under DTAAs, with reduced withholding rates. These arrangements require careful DTAA analysis, TRC collection from the service provider, and Form 10F filing. The Indian company must also ensure that the arrangement is at arm's length (transfer pricing) and that the Principal Purpose Test conditions are met.

How to Obtain a Tax Residency Certificate from India — Form 10FA and Form 10FB

An Indian resident who needs a TRC to claim treaty benefits in a foreign country must apply to the competent authority in India — the Commissioner of Income Tax (International Taxation) or the Assessing Officer having jurisdiction over the applicant. The application is filed in Form 10FA on the income tax portal at incometax.gov.in. The TRC is issued in Form 10FB.

1. Determine the DTAA and the TRC Requirement. Identify the specific DTAA under which the TRC is required and the foreign country's tax authority that will accept it. Check whether the foreign tax authority has specific requirements for the TRC — some countries require the certificate to be apostilled or authenticated by the Indian Ministry of External Affairs in addition to being issued by the Income Tax Department.
2. Log in to the Income Tax Portal.
3. Complete Form 10FA. Form 10FA requires the following information: the applicant's name, PAN, status (individual, company, firm, etc.), nationality (for individuals), country in which TRC is required, the relevant DTAA, the assessment year(s) for which the TRC is required, the period for which tax residency is to be certified, the applicant's address in India for the relevant period, and a declaration that the applicant is a resident of India for tax purposes for the relevant period. Accurate, consistent information is critical — the TRC will contain whatever is stated in Form 10FA.
4. Submit Form 10FA and Track Application. Submit the completed Form 10FA online. The system generates an acknowledgement. The application is processed by the jurisdictional Assessing Officer or CIT (International Taxation). The AO may call for supporting documents — typically the previous year's income tax return (ITR-7 or applicable ITR), PAN card copy, and proof of Indian address. Processing typically takes 2 to 4 weeks.
5. Receive Form 10FB — The TRC. Once the AO is satisfied that the applicant is a resident of India for tax purposes, Form 10FB (the Tax Residency Certificate) is issued. Form 10FB will state the applicant's name, PAN, status, the DTAA under which it is issued, the period for which it is valid, and the AO's details. This certificate is then submitted to the foreign tax authority or foreign payer to claim the treaty benefit.
6. Apostille or Authentication if Required. Some countries require the TRC to be apostilled under the Hague Apostille Convention, or authenticated by the Ministry of External Affairs (MEA) and then by the foreign country's embassy in India. Check the requirements of the specific foreign country and arrange apostille/authentication through the MEA after receiving Form 10FB from the Income Tax Department.

How Non-Residents Obtain a TRC from Their Home Country

The process for a non-resident to obtain a TRC from their home country varies by jurisdiction, but the general approach is similar across countries:

• Identify the competent authority in the home country: HMRC (UK), IRS (USA), BZSt (Germany), IRAS (Singapore), ATO (Australia), FTA (UAE), Revenue Singapore, etc.
• File an application for a certificate of residence or tax residency certificate with the competent authority, stating that the certificate is required for claiming DTAA benefits in India and citing the specific DTAA article
• Provide the home country tax authority with the applicant's tax identification number, proof of tax residency (tax returns filed, assessment notices received), and details of the Indian income for which DTAA benefits are sought
• The home country tax authority reviews the application and, if satisfied with residency, issues the TRC in its standard format
• Review the TRC against the Rule 21AB particulars required under Indian income tax law — name, status, nationality, country of registration, tax identification number, residential status, period, and address. If any particular is missing, Form 10F must be filed online on the Indian income tax portal to supplement the TRC
• Submit the TRC and Form 10F (if applicable) to the Indian payer before the income payment is made, to ensure TDS is deducted at the DTAA rate

India's DTAA Network — Key Benefits and DTAA Partners

India has signed and ratified DTAAs with over 90 countries. These treaties vary significantly in their coverage, withholding rates, and exemptions. Understanding the key benefits available under India's major DTAAs helps taxpayers identify where TRC-based DTAA planning is most valuable:

Major DTAA Partners and Withholding Rate Benefits

The following are the key treaty rates under India's major DTAAs (for informational reference; actual rates depend on specific circumstances and treaty interpretation):

Domestic rates without a DTAA are typically 20% on dividends, 30%/20% on interest, and 25% on royalties and FTS — so the treaty rates above represent a substantial reduction, available only where a valid TRC is furnished.

UAE, Bahrain, Saudi Arabia — Zero-Tax Country DTAAs

India has DTAAs with UAE, Bahrain, and Saudi Arabia. These countries impose no personal income tax. Indian residents working in these countries and NRIs who are tax residents of these countries frequently use TRCs to establish their tax residency and claim DTAA benefits on Indian-source income. The UAE TRC (issued by the UAE Ministry of Finance) is widely used by UAE-based NRIs with Indian investments. Since the UAE has no personal income tax, the TRC simply establishes UAE tax residency — the income is not taxed in UAE but the DTAA provides for reduced Indian withholding under specific provisions.

Mauritius and Singapore — The Capital Gains DTAAs (Grandfathered)

Mauritius and Singapore DTAAs were historically India's most significant capital gains exemption treaties for foreign investors in Indian equities. Under the original Mauritius DTAA, capital gains on sale of Indian shares were taxable only in Mauritius (where there was no capital gains tax), making Mauritius-routed investment completely capital gains tax-free in India. The India-Mauritius DTAA was renegotiated in 2016, with the capital gains exemption withdrawn for shares acquired after 1 April 2017. The India-Singapore DTAA was similarly amended. However, investments made in Indian shares before 1 April 2017 through Mauritius or Singapore routes continue to benefit from the grandfathered exemption, subject to TRC-based substantiation.

Cyprus — Denunciation and New DTAA

India unilaterally notified Cyprus as a notified jurisdictional area in 2013 due to exchange of information concerns, effectively suspending DTAA benefits. India and Cyprus have since signed a new DTAA (in force from 2016) which provides for capital gains exemption on shares acquired before 1 April 2017, similar to the Mauritius/Singapore grandfathering. The new India-Cyprus DTAA is significantly tighter on beneficial ownership and anti-avoidance provisions than the old treaty.

The Principal Purpose Test (PPT) and MLI — Anti-Avoidance in DTAA Claims

The Tax Residency Certificate is a necessary but increasingly insufficient condition for claiming DTAA benefits. The OECD's Base Erosion and Profit Shifting (BEPS) project has introduced significant anti-avoidance provisions into India's DTAAs through the Multilateral Instrument (MLI), which India signed and ratified, and which has come into force with respect to several of India's key DTAA partners.

The Multilateral Instrument (MLI)

The MLI is a multilateral treaty that simultaneously amends multiple bilateral DTAAs without requiring separate bilateral renegotiations. India adopted the MLI with effect from 1 October 2019 for countries that are also MLI signatories. The MLI introduced three key changes to India's covered DTAAs: (1) the Principal Purpose Test; (2) tie-breaker rules for dual-resident entities; and (3) modifications to the definition of permanent establishment. The impact of the MLI varies by DTAA — not all of India's DTAA partners have adopted the MLI with the same provisions.

The Principal Purpose Test (PPT)

The Principal Purpose Test, introduced through the MLI, provides that a DTAA benefit (reduced withholding rate, exemption, or other treaty benefit) shall not be granted if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of an arrangement or transaction. In plain terms: if the primary reason a non-resident structured their investment through a particular treaty country was to get the treaty benefit (rather than for genuine business reasons), the benefit can be denied even if the non-resident has a valid TRC from that country.

The PPT is a facts-and-circumstances test. Factors that Income Tax Officers consider in PPT analysis include: whether the non-resident has genuine economic substance in the treaty country (employees, office, actual business activity); whether the treaty country structure was created or used specifically to route the investment to benefit from the DTAA; whether the non-resident is the beneficial owner of the income; and whether the income would have been structured differently if the DTAA benefit did not exist.

Beneficial Ownership Requirement

Separate from the PPT, many DTAAs and Indian domestic courts have developed a beneficial ownership test: the DTAA benefit is available only to the beneficial owner of the income, not to a conduit entity that is merely a formal recipient. A foreign holding company that receives dividends from an Indian subsidiary but is required to immediately pass them on to its own parent under a back-to-back agreement may not be the beneficial owner of the dividends and may therefore not be entitled to the DTAA dividend rate.

TRC Compliance for Indian Payers — What Companies Must Do

Indian companies, banks, and other entities that make payments to non-residents — whether dividends, interest, royalties, or FTS — have specific TDS compliance obligations when DTAA rates are applied. The Indian payer is the first line of enforcement of TRC requirements. Our TDS Return Filing service covers all TDS compliance for Indian companies making cross-border payments. Key obligations for Indian payers are:

• Collect the non-resident payee's TRC before the first payment in each financial year — the TRC must be valid and current for the period of payment
• Collect Form 10F or verify that the TRC contains all Rule 21AB particulars (name, status, nationality, country of registration, tax identification number, residential status, period, and address)
• Conduct a basic beneficial ownership assessment — verify that the payee is the beneficial owner of the income and not a conduit entity
• Consider the PPT — if there are red flags suggesting the structure was created primarily to benefit from the DTAA, the payer should exercise caution and consider deducting at domestic rates pending clarification
• Deduct TDS at the applicable DTAA rate, deposit it with the government, and report it in the quarterly TDS return (Form 27Q for non-resident payments) with the treaty provision cited
• Maintain the TRC and Form 10F on file — the Income Tax Department can call for these documents in scrutiny assessment or survey proceedings
• Issue Form 16A (TDS certificate) to the non-resident payee showing the amount paid and TDS deducted at the DTAA rate

How TRC Requirements Have Evolved in India — Historical Background

Pre-2012 — No Statutory TRC Requirement

Before the Finance Act, 2012, there was no statutory requirement for a non-resident to furnish a TRC to claim DTAA benefits in India. Payers applied DTAA rates based on the non-resident's self-certification of residency, without any requirement to collect an official government certificate. This led to significant abuse: conduit companies and back-to-back structures routinely claimed DTAA benefits without any genuine connection to the treaty country. The Income Tax Department's challenges to treaty shopping were long-standing but had no specific statutory backing.

2012 — Finance Act Introduces Mandatory TRC Requirement

The Finance Act, 2012 introduced Section 90(4) of the Income Tax Act, making the furnishing of a TRC a statutory prerequisite for claiming DTAA benefits. Rule 21AB prescribed the particulars that TRCs must contain. Form 10F was introduced for supplementary self-declaration where TRCs were incomplete. This was a significant pro-revenue reform that placed the evidentiary burden on the non-resident claimant.

2013–2016 — Mauritius, Singapore, Cyprus DTAA Renegotiations

The period from 2013 to 2016 saw India renegotiate or amend three of its most significant capital gains DTAAs — with Mauritius (2016), Singapore (2016), and Cyprus (2016). All three treaties had historically provided capital gains exemptions that had been used extensively for foreign portfolio investment into India. The renegotiations removed the exemptions prospectively while grandfathering existing investments. TRC compliance requirements became more stringent as the treaties now required grandfathering verification.

2019 — MLI Enters Force for India

The Multilateral Instrument entered into force for India's covered DTAAs from 1 October 2019. The MLI introduced the Principal Purpose Test, modified permanent establishment provisions, and added tie-breaker rules — fundamentally changing the DTAA benefit landscape. DTAA claims that once required only a TRC now require a full PPT analysis demonstrating that DTAA benefits were not the principal purpose of the structure.

2022 — Online Form 10F and PAN Requirement for Non-Residents

From July 2022, Form 10F was required to be filed online on the income tax portal. This created a significant compliance challenge for non-residents who did not have Indian PANs — they were required to obtain PAN to file Form 10F online. The CBDT provided several relaxations but the general requirement remains that Form 10F is an online filing, and non-residents without existing Indian PAN face an additional compliance step.

Why Choose N D Savla & Associates for Tax Residency Certificate Services?

Tax Residency Certificate compliance sits at the junction of international tax law, domestic TDS compliance, and treaty policy — three fields that each require specialist knowledge. N D Savla & Associates brings all three to every TRC engagement.

Complete DTAA Analysis Before TRC Application

Before advising a client to apply for a TRC or to claim a DTAA rate, we conduct a complete DTAA analysis: which treaty applies; what the applicable rate or exemption is; whether the MLI has modified the treaty; whether the PPT applies to the structure; whether the beneficial ownership requirement is satisfied; and what documentation is required beyond the TRC itself. This analysis ensures that the DTAA claim is both legally sustainable and fully documented. We integrate this analysis with our Tax Health Check service for clients with international income profiles.

Form 10FA Application and Follow-Up for Indian Residents

We handle the complete Form 10FA application process for Indian residents who need a TRC for overseas use: compiling the required documentation, completing Form 10FA on the income tax portal, liaising with the jurisdictional AO during processing, receiving Form 10FB, and arranging apostille/authentication where required by the foreign tax authority. For Indian companies with multiple overseas income streams — dividends from foreign subsidiaries, royalties from technology licensing — our Income Tax Audit team ensures that the underlying tax compliance is in order before the TRC is applied for.

TDS Compliance for Indian Payers Making Cross-Border Payments

We advise Indian companies on their TDS obligations when making payments to non-residents — what TRC to collect, how to verify Form 10F, when to apply DTAA rates, how to handle beneficial ownership analysis, and how to document PPT compliance. We file the quarterly Form 27Q TDS returns for non-resident payments, ensuring correct treaty citation and full documentation. Companies with significant cross-border payments benefit from our integrated approach to DTAA compliance and TDS return filing.

PPT and MLI Advisory for International Structures

The Principal Purpose Test and MLI have created a new layer of compliance complexity for companies with international holding structures. We advise clients on whether their existing structures pass PPT analysis, what economic substance needs to be demonstrated in treaty countries, and what documentation to maintain to defend DTAA benefit claims if challenged by the Income Tax Department. This advisory is integrated with our Virtual CFO and Business Tax Filing services for companies with international operations.

Frequently Asked Questions About Tax Residency Certificates