Tax Residency Certificate (TRC) for Non-Resident Indians (NRIs)
Overview
A Tax Residency Certificate (TRC) is a certificate issued by a competent tax authority in a country, establishing the status of “Tax-Resident” of the concerned country. This certificate is crucial for taxation purposes, especially when an NRI has income in multiple countries and could be subject to double taxation.
Importance of TRC
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Proof of Tax Residence: TRC serves as proof of tax residence for the purpose of taxation on income generated from a particular country.
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Double Taxation Avoidance: Helps NRIs claim relief under Double Taxation Avoidance Agreements (DTAA), which aim to avoid taxing the same income in both countries.
Tax Residency Determination
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As per Section 6 of the IT Act, 1960, an individual is a Resident Indian (RI) for tax purposes if they were in India for more than 182 days in a fiscal year.
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NRIs, who stay less than the designated days in India, need a TRC to show to Indian tax authorities while claiming DTAA relief.
DTAA Provisions
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Sections 90 & 90A: Define the rules for DTAA applicable to NRIs.
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Taxation: Income is typically taxed in the country where the individual was tax-resident for the said financial year. For NRIs, this could mean taxation in the source country if they were not resident in India for at least 182 days.
Obtaining a TRC
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Approach the competent Income Tax authority in your country of residence (e.g., IRS in the USA, HMRC in the UK).
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Financial advisors or local banks can assist with the application format.
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A TRC must be obtained fresh for each financial year and submitted to tax authorities and/or banks.
Benefits of TRC
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Reduced TDS: Helps with reduced Tax Deducted at Source (TDS) rates.
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Claiming DTAA Relief: Required when claiming DTAA relief while filing tax returns.
Application Process in India
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Form 10FA: NRIs need to submit Form 10FA to the competent IT authority in India.
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A TRC is specified under Rule 21AB of the Income Tax Act for claiming tax relief under agreements referred to in Sections 90 and 90A.
For more detailed information, you can refer to the .
