Tax Residency Certificate (TRC)

A Tax Residency Certificate (TRC) is the primary document a taxpayer uses to prove their tax residency in one country in order to claim relief from double taxation in another. In India, the legal basis for both issuing and accepting TRCs is found in Sections 90 and 90A of the Income Tax Act, 1961, read with Rule 21AB of the Income Tax Rules. The TRC is the linchpin of DTAA (Double Taxation Avoidance Agreement) claims — without it, the lower withholding rates negotiated in India’s treaties with 90+ countries simply cannot be applied.

What is a Tax Residency Certificate?

When two countries have a DTAA, residents of one country are entitled to lower withholding rates and other reliefs on income arising in the other country. To prevent treaty shopping and ensure that only genuine residents of the treaty partner claim these benefits, the tax authority of the residence country must certify that the taxpayer is in fact a tax resident there for the relevant period. That certification is the TRC.

For a non-resident receiving Indian-source income — say, a US software company being paid royalty by an Indian licensee — the TRC issued by the US Internal Revenue Service is what allows the Indian payer to withhold tax at the India–US DTAA rate (typically 10–15%) rather than the 20% domestic Section 195 rate.

For an Indian resident receiving foreign income — say, a Pune-based consultant being paid by a UK client — an Indian TRC issued under Section 90 in Form 10FB allows them to claim relief in the UK under the India–UK DTAA.

Who Files a TRC and How

Non-residents claiming DTAA benefits in India

A non-resident does not need to “file” a TRC — they obtain it from their home country tax authority and then furnish it to the Indian deductor or to the Income Tax Department. The form, format and process for obtaining the TRC abroad varies by country. The Indian acceptance criteria are governed by Rule 21AB.

Documents the non-resident typically furnishes to the Indian payer:

1. The TRC issued by the home country tax authority for the relevant period
2. Form 10F — e-filed on the Indian Income Tax portal since CBDT Notification 03/2022, used to supply any details the TRC doesn’t already contain
3. PAN (or alternative documentation under Rule 37BC if no PAN)
4. A no-Permanent-Establishment (no-PE) declaration where the relevant DTAA article requires it
5. Beneficial ownership declaration where relevant

Indian residents seeking a TRC for foreign use

An Indian resident applies to the jurisdictional Assessing Officer in Form 10FA, providing:

The AO reviews the application against the resident’s filed returns and other records. If satisfied, the AO issues the TRC in Form 10FB, which is the prescribed format under Rule 21AB(3). Form 10FB is signed by the AO and bears the Department’s seal.

Validity Period

A TRC is valid for the period explicitly stated on the certificate, almost always one financial year. Indian Form 10FB issued for FY 2026-27, for example, is valid only for income arising in or paid during 1 April 2026 to 31 March 2027. A new application is required each year.

This means an Indian deductor who pays the same non-resident vendor across multiple financial years must collect a fresh TRC every year. A TRC issued for FY 2025-26 cannot be used to support DTAA withholding on a payment made in FY 2026-27.

Common Errors and Consequences

Even a small documentation gap can collapse the DTAA claim and force the higher domestic withholding:

• Stale TRC: Using last year’s TRC for this year’s payment is the most common error. The deductor loses the lower rate and the deductee loses the credit until corrected.
• TRC missing information required by Rule 21AB: Some foreign TRCs (for example, certain US Form 6166 letters) do not contain all the particulars Indian rules require. In that case, the non-resident must file Form 10F to supply the missing items.
• Form 10F not e-filed: Since 16 July 2022, paper Form 10F is no longer accepted from non-residents who already have an Indian PAN. The remittee must e-file via the Income Tax portal — paper filings are treated as no filing.
• No PAN and no Rule 37BC documentation: Section 206AA forces TDS at the higher of the prescribed rate or 20%. The TRC alone cannot override Section 206AA.
• Beneficial ownership not established: Some DTAA articles (like dividends and interest) require the recipient to be the beneficial owner. A TRC alone does not prove beneficial ownership; the deductor may demand additional declarations.
• Treaty shopping flags: Where the residence chosen looks artificial — say, a shell company in a low-tax jurisdiction — the Indian Assessing Officer can deny treaty benefit under the General Anti-Avoidance Rules (GAAR) and the Multilateral Instrument’s Principal Purpose Test, even with a valid TRC.
• Disallowance of expense: If the deductor applies the lower DTAA rate without a valid TRC, the resulting short-deduction can be added back under Section 40(a)(i), disallowing the entire payment as a deduction.

Practical Example: Indian Resident Applying for TRC

A Bengaluru software consultant earns USD 60,000 in FY 2026-27 from a Singapore-based client who is required to withhold Singapore tax on professional fees. To claim relief under the India–Singapore DTAA, the consultant needs an Indian TRC.

Process:

1. Consultant prepares Form 10FA with PAN, nationality (Indian), period (FY 2026-27), Singapore client address, source of income (professional fees), and the country where the TRC will be presented (Singapore)
2. Application filed with the jurisdictional Assessing Officer along with copies of last year’s ITR, bank statements showing the Singapore receipts, and the engagement letter
3. AO verifies that the consultant is in fact a resident under Section 6 of the Income Tax Act and has filed returns
4. AO issues Form 10FB — the TRC — typically within 4–8 weeks
5. Consultant submits Form 10FB to the Singapore client, who can then withhold at the lower India–Singapore DTAA rate (5% on FTS) instead of the Singapore domestic rate

The consultant must reapply each year to support the next year’s income.

Practical Example: Non-Resident Furnishing TRC to Indian Payer

A US-based design agency invoices an Indian e-commerce company USD 40,000 (₹34,00,000 at ₹85/USD) for branding work in May 2026.

The agency furnishes:

1. TRC: IRS Form 6166 for calendar year 2026
2. Form 10F: e-filed on the Indian Income Tax portal supplying the period (1 January 2026 to 31 December 2026), tax identification number (US EIN), PAN of the agency, and address abroad
3. No-PE declaration: confirming no permanent establishment in India
4. PAN: of the agency

The Indian payer’s CA issues Form 15CB certifying the India–US DTAA Article 12 rate of 15%, the payer files Form 15CA Part C, withholds ₹5,10,000, remits ₹28,90,000 net via SWIFT, and reports the deduction in the Q1 Form 27Q filed by 31 July 2026.

If the TRC had been from FY 2025-26 (stale), the entire DTAA chain would collapse — withholding would default to 20% under Section 195, increasing the deduction to ₹6,80,000.

How Omnivoo Handles TRC Documentation

Omnivoo automates TRC collection and validation for every cross-border payment — checking validity period against the payment date, verifying that Form 10F has been e-filed, requesting refreshed TRCs each financial year from international vendors, and maintaining the document trail required for Form 15CA, Form 15CB and quarterly Form 27Q filings. For more on cross-border tax obligations, see Non-Resident Indian (NRI) and Tax Deducted at Source (TDS).