Tax Residency Certificate (TRC) for Non-Resident Indians

Non-Resident Indians usually have income from more than one country. Such incomes are subject to the application of tax in both countries due to local laws despite the fact that you are a tax resident in only one of these countries. In such situations, a tax residency certificate (TRC) can help NRIs avoid paying double taxes on income earned in both their country of residence and India under the Double Taxation Avoidance Agreement (DTAA).

What is Tax Residency Certificate

The Government of India has concluded a Double Taxation Avoidance Agreement with a number of countries to avoid taxing an income twice. From the year 2013, Indian citizens living in these countries can benefit from such tax treaties. A tax residency certificate (TRC) is one of the main documentary evidence to establish your tax residency and be eligible for a DTAA relief claim.    

For example, an NRI earns taxable income in India and repatriates the same income to his/her country of residence after the deduction of applicable taxes, or other way round. He/she may be liable to pay income tax in India and his/her country of residence for the same income. To avoid being taxed twice (in India and country of your residence) under DTAA, you can obtain the TRC from the government of the country of which you are a tax resident.   

Importance of TRC for Non-Resident Assessee

An NRI assessee shall obtain a TRC from the government of the country or the specified territory of which he/she is a tax resident. The TRC shall include the following details:  

  • Name of the NRI/ OCI assessee
  • Status of the assessee (individuals, firm, etc.)
  • Nationality (individuals)/ country of incorporation/ registration (firms, etc.)
  • Assessee’s Tax Identification Number (TIN) in the country of residence, including a unique identification number issued by the government 
  • Residential status for the purpose of taxation
  • Period for which the certificate is valid
  • Address of the assessee for the period during which the certificate is applicable

The above details shall be provided by the NRI assessee in the Form 10F. The certificate mentioned in the sub-rule (1) shall be duly validated by the Government of the country or territory which the assessee claims to be a tax resident of.  

How can NRIs Obtain Tax Residency Certificate

The exact procedure for obtaining the TRC may be different in each country. NRI assessees can approach the competent Income Tax authority in their country of residence to obtain the TRC, for example IRS in the USA or HMRC in the UK. To avoid any mistakes and rejections in the future, you must consult your financial advisor, the CA or CPA/ CFA or the local bank where you have your local account. They will help you with the format to apply for TRC in the country of your residence.

Types of Income Applicable under TRC in India

While, income covered may vary depending on DTAA between India and the country where you reside, most of the following incomes are covered:

  • Interest income on NRI deposits
  • Dividends earned in India
  • Salary earned in India
  • Capital gains – short-term and long-term
  • Consultancy, royalty income, etc.
  • Income from the business operating in India
  • Miscellaneous income

Tax Residency Certificate Format

The format of the tax residency certificate may vary from country to country. 

Certificate of UK Residence

Tax Residency Certificate (TRC) for Non-Resident Indians

There are various ways for NRIs to save income tax in India, but due to a complicated tax system and recurrent amendments, understanding tax laws can be confusing, especially for NRIs. NRIs may miss claiming deductions and other benefits. At SBNRI, we understand this struggle. You can download SBNRI App to connect with our NRI Tax Experts to know more about new TRC, TDS/ TCS rules for NRIs. You will also get end-to-end assistance related to NRI tax filing. 

SBNRI will also help you get a lower TDS Certificate to reduce tax payable. You can also click on the button below to ask any questions. Visit our blog and YouTube Channel for more details.

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