Tax Residency Certificate (TRC) for NRIs: Eligibility, Benefits & Application Process

For Non-Resident Indians (NRIs), paying taxes in a foreign country can be a complicated matter.  Whether earnings are generated in India or abroad, manageable complications arise, particularly concerning the avoidance of double taxation. One of the significant documents that will be useful in this situation is the Tax Residency Certificate (TRC). A TRC is required for you to be able to avail relief under any applicable Double Taxation Avoidance Agreement (DTAA).

In this blog post, we will talk about all the things you need to know about TRC, including what TRC is, its eligibility, the application process, benefits, and everything else.

What is TRC?

TRC full form: Tax Residency Certificate.

A Tax Residency Certificate (TRC) is an official certificate or document issued by the income tax authorities of a country affirming that an organisation or an individual is a resident of that country for tax purposes. This document acts as evidence of residency under the relevant tax rules, law, or regulations, and certain residency benefits may be claimed under Double Taxation Agreements (DTAs) as stated in the respective Treaty. Through this document, a taxpayer can avoid being taxed twice on the same income (once in the country of residence and then in the country where earning income).

TRCs are particularly important for individuals and businesses involved in cross-border transactions or earning income from foreign sources. The document typically includes details such as the name of the taxpayer, status (individual/company), nationality or country of incorporation, tax identification number, and the period for which residency is certified. To obtain a TRC, applicants usually need to meet certain residency conditions and submit relevant documentation, including tax returns or financial records.

In the context of India, TRC is essential when:

• An NRI earns income from India.
  
• The NRI wants to avail of benefits under a tax treaty (DTAA) between India and their resident country.
  

TRC in practical terms: It’s your proof that you are a tax resident of a particular country, needed to avoid paying taxes twice on the same income in two countries.

Why Do NRIs Need a Tax Residency Certificate?

If you’re an NRI receiving income from Indian sources—rent, interest, dividends, capital gains, or business income—you may be subject to taxation in both India and your country of residence.

Non-Resident Indians (NRIs) need a Tax Residency Certificate (TRC) primarily to claim the benefits of Double Taxation Avoidance Agreements (DTAs) between India and their country of residence. Without a TRC issued by the foreign tax authority, Indian banks or other payers must withhold tax on your India-sourced income (interest, dividends, rents, etc.) at the full domestic rate. Presenting a valid TRC allows you to apply the lower, treaty-prescribed withholding rates—often significantly below the default rate—and thus avoid being taxed twice on the same income.

Beyond reduced withholding, a TRC is essential for compliance and repatriation formalities. Indian tax authorities and financial institutions require it (alongside Form 10FA) as proof that you’re taxable abroad, which streamlines refund claims, foreign tax credit applications, and fund repatriation. It also fulfills Know-Your-Customer (KYC) norms and helps prevent administrative delays, making it a must-have document for any NRI with cross-border earnings.

Here’s how a TRC helps:

• Claim reduced tax rates under DTAA.
  
• Avoid double taxation.
  
• Ensure compliance with Indian tax laws.
  
• Help Indian companies apply the correct TDS rates on their income.
  
• Establish a tax identity for cross-border transactions.
  

 

Understanding Double Taxation & DTAA

Double taxation occurs when the same income is taxed in two different countries—once in the country where it is earned and again in the country where the individual resides. For instance, if an NRI earns income in India but also pays taxes in their country of residence, they might end up paying tax on the same amount twice. This not only impacts the financial well-being of taxpayers but also creates unnecessary complexity and burden in cross-border income situations.

To resolve this, countries enter into Double Taxation Avoidance Agreements (DTAA). A DTAA is a bilateral treaty between two countries that outlines how tax will be levied when the same income is taxable in both jurisdictions. These agreements help ensure that taxpayers don’t face double taxation by offering methods like exemption (taxed only in one country) or tax credit (credit for tax paid in one country can be claimed in the other). India has signed DTAA with over 90 countries. To claim DTAA benefits, individuals (including NRIs) typically need to provide a Tax Residency Certificate (TRC) from their country of residence, along with other supporting documents like Form 10F and a self-declaration.

Example: Raj, an Indian living in the UK, earns interest from a fixed deposit in India.

• India withholds 30% TDS.
  
• The UK also taxes global income.
  
• Without TRC, Raj pays tax twice.
  
• With TRC + DTAA, he can claim a lower tax rate or offset Indian tax in the UK.
  

 

Eligibility Criteria for TRC (for NRIs)

A Tax Residency Certificate (TRC) is an official document issued by the tax authorities of a country that confirms a person’s tax residency status. For NRIs, obtaining a TRC is crucial when they want to benefit from Double Taxation Avoidance Agreements (DTAA) between India and the country of their residence. The TRC ensures that NRIs do not face double taxation on income earned in India and abroad.

1. Residential Status

To qualify for a TRC, an individual must be considered a tax resident of a foreign country. Tax residency is determined according to the laws of the country in which the individual resides, and it usually depends on the number of days the individual stays in that country. For example:

• In the UK, an individual must stay in the country for 183 days or more during the financial year to be considered a tax resident.
  
• In the United States, the requirement might be different, but generally, you need to meet the Substantial Presence Test (which involves the number of days present in the US over the past three years).
  

The foreign tax authority will assess this status based on the individual’s stay and other criteria like family ties, employment, and other links to the country.

2. Tax Identification Number (TIN)

To obtain a TRC, you must have a Tax Identification Number (TIN) or its equivalent issued by the tax authorities of your country of residence. The TIN is a unique identification number that links the individual to their tax record. In many countries, this is a mandatory requirement to ensure that the individual is a registered taxpayer.

• For instance, in the UK, this could be the National Insurance Number (NI) or Unique Taxpayer Reference (UTR).
  
• In the US, the Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) would be required.
  

3. Proof of Tax Residency

The individual must pay taxes or be liable to pay taxes in their country of residence on global income, which includes income earned both within and outside that country. This tax liability is a key condition for applying for a TRC. Without fulfilling this requirement, the foreign tax authority may not issue the TRC.

To apply for a TRC, you may need to show:

• Your tax return filings from the previous year.
  
• Proof of your tax liability in the country (such as tax assessment notices or tax payment receipts).
  

4. Income Sources in India

The NRI must have income taxable in India that qualifies for relief under the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence. These income sources could include:

• Interest income from Indian banks or financial institutions
  
• Dividend income from Indian companies
  
• Rental income from properties located in India
  
• Capital gains from investments in Indian securities
  

Without such taxable income in India, the need for a TRC is irrelevant, as the individual would not be subject to Indian taxes.

5. Application Process for TRC

To obtain the TRC, you must formally apply to the tax authorities of the country where you reside. The process varies by country but generally involves the following steps:

• Submission of an application: This includes filling out forms available from the foreign tax department, indicating your status as a tax resident.
  
• Documents required: Along with the application, you may need to submit:
  
  • Proof of identity (passport, national ID)
    
  • Proof of address (utility bills, lease agreements)
    
  • Tax return filings or tax assessment documents from the country of residence
    
  • Tax Identification Number (TIN)
    

Once your application is approved, the tax authority will issue the TRC.

6. Additional Documents: Form 10F & Self-Declaration

To claim DTAA benefits, an NRI must submit the TRC along with Form 10F and a self-declaration to the Indian tax authorities or relevant institutions (such as banks).

• Form 10F: This form is a declaration that the taxpayer is a resident of a foreign country for tax purposes and is eligible for DTAA benefits.
  
• Self-Declaration: The NRI must provide a self-declaration confirming that they are not a tax resident of India and that they are eligible for the tax benefits under the relevant DTAA.
  

 

Documents Required to Apply for TRC in India

1. Form 10FA – Application for TRC

• Official application form to request a Tax Residency Certificate.
  
• Must be submitted to the jurisdictional Assessing Officer (AO) under the Indian Income Tax Department.
  
• Includes personal details, period for which TRC is sought, and reason for application (e.g., DTAA benefit).

2. Copy of PAN Card

• Mandatory for all income tax procedures in India.
  
• Serves as your unique tax identity.
  

3. Copy of Passport

• Required to verify your identity and nationality.
  
• Include the biodata page and immigration stamp pages (to help establish stay duration, if needed).
  

4. Indian Address Proof

• Shows your link or residence in India.
  
• Acceptable documents:
  
  • Utility bill (electricity, gas, water)
    
  • Aadhaar card
    
  • Rent agreement
    
  • Bank statement with Indian address
    

5. Proof of Stay in India

• Demonstrates that you qualify as a tax resident of India (generally 182+ days in a financial year).
  
• Acceptable proofs:
  
  • Passport pages with immigration stamps
    
  • Boarding passes/flight tickets
    
  • Hotel/guest house bills
    
  • Declaration of stay (with dates and address)
    

6. Income Tax Return (ITR) for the Applicable Year (if filed)

• Though not always mandatory, it’s strongly recommended if you’ve filed an ITR in India for that financial year.
  
• Helps support your claim of being a tax resident.
  

7. Self-Declaration Letter

• A signed letter confirming:
  
  • You are an Indian tax resident for the relevant financial year
    
  • You are applying for TRC to claim treaty (DTAA) benefits in your country of residence
    
• Mention your PAN, passport number, address, and period of residency.
  

8. Authorization Letter (if submitted through a representative)

• If your CA or tax consultant is applying on your behalf, include:
  
  • Power of Attorney (PoA) or
    
  • Signed authorization letter
    

Important Notes:

• All documents must be self-attested by the applicant.
  
• Incomplete documentation may delay TRC issuance.
  
• Documents should relate to the same financial year for which the TRC is being requested.

 

Application Process: Forms 10FA & 10FB Explained

To obtain a TRC in India, NRIs must apply to the Indian Income Tax Department using Form 10FA. Upon satisfaction, the Assessing Officer (AO) will issue the TRC in Form 10FB.

Step-by-Step Process

Step 1: Determine Eligibility

Ensure you qualify as a tax resident of India under Section 6 of the Income Tax Act, 1961. For NRIs, this usually means:

• Staying in India for 182 days or more in a financial year
  OR
  
• Meeting the conditions of 60 days in India + 365 days in the last 4 years, depending on your citizenship and purpose of visit.
  

Step 2: Gather Mandatory Documents

Collect and self-attest the following:

• PAN Card
  
• Passport (with visa/immigration stamps)
  
• Indian address proof
  
• Proof of stay in India
  
• Self-declaration letter
  
• ITR (if filed)
  
• Form 10FA duly filled and signed
  

 

Form 10FA – Application for TRC

What is Form 10FA?

Form 10FA is the official application form used to request a Tax Residency Certificate from the Indian Income Tax Department.

Key Fields in Form 10FA:

• Full Name and Address of the applicant
  
• PAN number
  
• Nationality and Residential Status
  
• Purpose of TRC (typically for claiming benefits under DTAA)
  
• Financial year for which the TRC is required
  
• Period of stay in India and the location of residence
  

Where to Submit Form 10FA?

Submit Form 10FA (along with supporting documents) to the Jurisdictional Assessing Officer (AO) of your PAN.

Form 10FB – Certificate of Residence (TRC)

What is Form 10FB?

This is the TRC issued by the Income Tax Department upon reviewing Form 10FA and your supporting documents.

Details Included in Form 10FB:

• Full name and address of the applicant
  
• PAN number
  
• Financial year of residence
  
• Jurisdictional Assessing Officer details
  
• Certification that the individual is a resident of India under the Income Tax Act
  

How and When is Form 10FB Issued?

• The AO will process the request and issue Form 10FB if all documents are in order.
  
• This usually takes 2 to 4 weeks, depending on workload and clarity of submitted records.
  

Submission Mode

• Offline: Traditionally, this was an offline process via physical submission to the AO.
  
• Online (E-Proceedings): In some cases, it can be initiated through the Income Tax e-filing portal by submitting a request under the “e-Proceedings” section and then uploading scanned documents.

 

Benefits of TRC for NRIs

Here’s why getting a TRC is a smart move:

1. Access to Double Taxation Avoidance Agreement (DTAA) Benefits

One of the most significant benefits of having a TRC is that it enables NRIs to avail themselves of provisions under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence. The DTAA is designed to prevent the same income from being taxed in both countries. By furnishing a TRC, NRIs can either avoid paying tax in one of the two jurisdictions or pay at a reduced tax rate, depending on the nature of the income and the specific treaty clauses.

For example, interest income from fixed deposits in India may attract a default Tax Deducted at Source (TDS) of 30%. However, if the DTAA rate is 10%, presenting a TRC allows the individual to benefit from this lower rate, effectively reducing the tax burden and ensuring better returns.

2. Proof of Tax Residency in India

A TRC is an official certificate issued by the Indian Income Tax Department that confirms an individual’s tax residency status in India for a particular financial year. For NRIs, this is crucial when dealing with foreign tax authorities or financial institutions that require evidence of where the individual is a resident for tax purposes.

Many foreign governments or tax departments require a TRC before processing tax exemption or credit claims. Having a TRC adds credibility to your tax position and simplifies paperwork when dealing with multiple jurisdictions.

3. Reduced Withholding Tax Rates on Indian Income

Without a TRC, Indian institutions such as banks, mutual funds, or companies may deduct tax at the highest applicable rate, typically without considering DTAA benefits. A TRC helps ensure that withholding tax (TDS) is applied at the lower rates prescribed under the treaty.

This applies to income such as:

• Interest on bank deposits
  
• Dividends from Indian companies
  
• Royalties or fees for technical services
  
• Capital gains from the sale of assets
  

By submitting a TRC to the deductor, you can maximize your post-tax income and avoid excessive deductions.

4. Helps in Claiming Tax Credit in the Country of Residence

Many countries allow tax credits for taxes paid abroad, but they require documentary evidence. A TRC issued by the Indian tax authorities serves as conclusive proof that tax was paid in India, and it is usually accepted by foreign governments when you’re claiming a credit or exemption.

This ensures smoother cross-border tax compliance and prevents double taxation, especially for NRIs who are required to declare global income in their country of residence.

5. Simplifies Financial and Legal Compliance

Having a TRC streamlines many financial processes for NRIs. For instance, while making investments in India or repatriating funds abroad, a TRC might be required by:

• Indian banks
  
• Authorized dealers (AD banks)
  
• Regulatory authorities such as the Reserve Bank of India (RBI)
  

By obtaining a TRC in advance, NRIs can avoid delays or queries in financial transactions, taxation formalities, or legal compliance requirements in both India and their resident country.

Common Mistakes NRIs Should Avoid

1. Incorrect or Incomplete Form 10FA Submission

Many NRIs make the mistake of filling out Form 10FA inaccurately or incompletely. Missing details such as the correct financial year, passport number, residential address, or purpose of the TRC (like DTAA benefit) can lead to delays or outright rejection. Always double-check the information and ensure all sections are properly filled before submission.

2. Not Providing Supporting Documents

A common oversight is failing to attach the necessary supporting documents with the application. Documents such as PAN card, passport, visa details, proof of stay in India, and address proof are mandatory. Submitting an application without these or with expired/invalid documents can lead to rejection. Always provide self-attested copies and ensure they are legible.

3. Ignoring Jurisdictional Assessing Officer (AO) Requirements

NRIs often submit Form 10FA to the wrong jurisdictional AO, which can lead to significant delays. The TRC application must be submitted to the AO linked to your PAN. You can find this information on the Income Tax e-filing portal. Also, different AOs may have specific document expectations or submission formats—failing to comply with these can stall your application.

4. Applying for the Wrong Financial Year

NRIs sometimes mistakenly apply for a TRC for the calendar year instead of the Indian financial year (April 1 to March 31). Since TRCs are issued for financial years under Indian tax laws, always specify the correct assessment year for which the certificate is needed, especially if you’re using it to claim DTAA benefits abroad.

5. Not Mentioning the Purpose of TRC

Applicants frequently overlook the need to mention why they are requesting the TRC, usually for availing tax relief under the DTAA. This is a critical part of the application and helps the AO understand the context of the request. Omitting this detail may result in unnecessary back-and-forth or rejection.

6. Delaying the Application

Waiting until the last minute to apply for a TRC can result in missed deadlines for tax filings or foreign submissions. Since it can take 2–4 weeks (or more) to process the request, it’s advisable to apply well in advance of any tax-related deadlines in your country of residence.

7. Submitting Hard Copies When Online Mode is Required (or Vice Versa)

Some AOs prefer receiving TRC applications through the Income Tax e-filing portal under the ‘e-Proceedings’ section, especially in larger cities. Submitting a hard copy when online submission is mandated (or the reverse) can result in delays or rejection. Always confirm the preferred mode of submission with your AO before proceeding.

8. Failure to Follow Up

Simply submitting the application and waiting isn’t always enough. NRIs often fail to follow up with the AO’s office, especially when documents are pending clarification or additional info is requested. Regular follow-up ensures the application remains on track and avoids unnecessary delays.

Tip: Even if you qualify for lower TDS under DTAA, you must submit TRC to the payer (e.g., bank, employer, etc.) in India before they make the payment.

Final Thoughts

The Tax Residency Certificate (TRC) is more than just a compliance document—it’s your gateway to global tax efficiency. For NRIs, it ensures you are not taxed twice on the same income and helps you remain on the right side of Indian tax laws.

Whether you’re earning from property, investments, or business in India, applying for a TRC saves money, ensures compliance, and keeps your finances in check.

Pro Tip: Always plan your taxes and consult a tax advisor to streamline your DTAA and TRC-related submissions.

 

Frequently Asked Questions (FAQs)

1. Is TRC mandatory for claiming DTAA benefits?

Yes. As per Section 90(4) of the Income Tax Act, submitting a valid TRC is mandatory to claim tax treaty benefits.

2. What if my country doesn’t issue TRCs?

You need to request a residency certificate or letter from the local tax authority. In some countries, alternative documents (like tax returns or residency statements) are accepted.

3. Is the TRC issued by India or my country of residence?

• If you’re an NRI claiming DTAA in India, your foreign country issues the TRC.
  
• If you’re an Indian resident earning abroad and want to claim DTAA abroad, then India will issue TRC via Form 10FB.

4. What is the difference between Form 10FA and 10FB?

• Form 10FA: Application for TRC.
  
• Form 10FB: Certificate issued by the Income Tax Authority after processing 10FA.

5. How long does it take to get a TRC in India?

Processing time varies, but typically 2–4 weeks after submission of Form 10FA with complete documents.