Tax Residency Certificate (TRC): Why NRIs Need It for DTAA Benefits in India

For Non-Resident Indians (NRIs), earning income from India while living abroad can sometimes create a tax issue: the same income may potentially be taxable in both India and the country where the NRI is a tax resident.

This is where a Double Taxation Avoidance Agreement (DTAA) can become important.

India has entered into DTAAs with several countries to provide relief from double taxation. However, simply being an NRI does not automatically mean that you can claim every benefit available under a DTAA. One of the key documents used to establish eligibility is the Tax Residency Certificate (TRC).

A TRC serves as official evidence that an individual is a tax resident of a particular foreign country. For an NRI claiming treaty benefits in India, it is now a statutory requirement, alongside a second, equally mandatory piece of documentation, for obtaining relief under the applicable DTAA.

What is a Tax Residency Certificate (TRC)?

A Tax Residency Certificate (TRC) is a certificate issued by the tax authority of the country where a taxpayer is considered a tax resident.

For example, if an NRI lives and is tax resident in the United States, the relevant US tax documentation establishing residency may be required to support a claim for DTAA benefits in India.

The TRC generally contains information such as:

• Name of the taxpayer
• Tax identification number or equivalent identification
• Country of residence
• Residential address
• Period for which the person is considered a tax resident
• Other information prescribed by the relevant tax authority

The exact format and procedure for obtaining a TRC depend on the taxpayer’s country of residence.

Why is a TRC important for NRIs?

An NRI may receive income from India in the form of:

• Rental income from Indian property
• Interest from Indian bank accounts
• Dividends
• Capital gains
• Pension or other income
• Fees, royalties or other specified income

Depending on the nature of the income and the applicable tax rules, India may have the right to tax such income.

At the same time, the NRI’s country of residence may also tax the income under its domestic tax laws.

A DTAA can provide relief by determining how particular income should be taxed or by providing mechanisms such as a lower tax rate or foreign tax credit.

Under the current law, a non-resident to whom a DTAA applies can claim relief under the treaty only after satisfying two conditions together: obtaining a TRC establishing residence in the foreign country, and furnishing prescribed additional information through a dedicated statutory form. Neither on its own is sufficient.

Therefore, the TRC helps establish where the taxpayer is a tax resident, which is a fundamental factor when applying treaty provisions — but it is only one half of the compliance requirement.

TRC vs. DTAA: What is the difference?

These two terms are often confused, but they serve different purposes.

DTAA is the tax treaty between two countries. It establishes rules for taxation of different types of income and provides mechanisms to reduce or eliminate double taxation.

TRC is evidence of the taxpayer’s tax residency in one of those countries.

In simple terms:

DTAA = The agreement

TRC = Evidence of tax residency

An NRI generally needs to satisfy the requirements of the applicable DTAA before claiming treaty benefits.

Is TRC mandatory for claiming DTAA benefits?

Yes — but on its own, it is not enough.

Under the Income-tax Act, 2025, which came into force from 1 April 2026 and replaced the six-decade-old Income-tax Act, 1961, Section 159(8) makes DTAA relief a documentation-driven entitlement. A non-resident can claim treaty relief only if both of the following are satisfied:

1. A Tax Residency Certificate (TRC) issued by the tax authority of the country of residence.
2. Prescribed additional information and documentation, furnished electronically through Form 41.

Having a TRC does not automatically guarantee a particular tax benefit. The taxpayer must still satisfy the conditions of the relevant DTAA and comply with applicable Indian tax procedures — including filing Form 41.

For example, the DTAA may specify a particular rate or method of taxation for interest, dividends, royalties, capital gains or other income. The taxpayer must determine which treaty article applies and whether all conditions have been met.

What is Form 41, and why does it matter?

Many older articles and tax resources refer to Form 10F for furnishing additional information along with a TRC. That reference is now outdated.

Under the Income-tax Act, 2025 and Rule 75 of the Income-tax Rules, 2026, Form 41 has replaced Form 10F. It is the operational mechanism through which the “prescribed information” required under Section 159(8) must be furnished.

Key features of Form 41:

• It must be filed electronically on the Income Tax e-filing portal as a self-declaration.
• The TRC is uploaded along with the form itself, to enable easier processing and verification.
• Non-resident taxpayers can register on the portal even without a PAN, using OTP verification sent to their registered phone number and email (or a Digital Signature Certificate, depending on their profile).
• Required details include the TRC, the taxpayer’s Tax Identification Number, personal details, tax residency details, and the specific DTAA article under which the benefit is claimed.
• Form 41 applies from Tax Year 2026–27 (income earned from 1 April 2026 onward).
• There is no fixed statutory deadline, but it is typically required once per financial year for each relevant stream of income, and must be furnished whenever treaty benefits are claimed — including for return processing where an ITR is filed.

If Form 41 and the TRC are not furnished, the DTAA benefit is not available, and the Indian payer must deduct tax at the applicable domestic withholding rate rather than the (usually lower) treaty rate.

NRIs and their advisors — including firms like Neha R Gupta & Co. — should therefore treat Form 41 as equally essential as the TRC itself, not as an optional add-on.

How can an NRI use a TRC to claim DTAA benefits?

The general process can be understood in the following steps:

Step 1: Determine your tax residency

First, determine whether you are a tax resident of the foreign country under its domestic tax laws.

Being an Indian citizen or holding an Indian passport does not by itself determine tax residency for DTAA purposes.

Step 2: Obtain the TRC

Apply to the relevant tax authority in your country of residence and obtain the Tax Residency Certificate for the applicable period.

The certificate should cover the relevant period for which treaty benefits are being claimed.

Step 3: Identify the applicable DTAA

Check whether India has a DTAA with your country of tax residence.

The relevant treaty article should then be examined based on the type of income involved.

Step 4: File Form 41 with the prescribed information

Register on the Income Tax e-filing portal (PAN is not mandatory) and electronically furnish Form 41, uploading the TRC along with it, together with your Tax Identification Number and other required details.

Step 5: Claim the applicable treaty benefit

Once the TRC and Form 41 requirements are satisfied, the taxpayer can claim the benefit available under the applicable DTAA, subject to its conditions.

Depending on the type of income, this could potentially result in a lower tax rate, exemption or relief from double taxation.

Example: NRI receiving interest income from India

Suppose an NRI is a tax resident of Country A and earns interest income from an Indian bank account.

India may tax the interest under its domestic tax provisions. Country A may also tax the same income because the individual is its tax resident.

If the India–Country A DTAA provides a specific rate or relief mechanism for such interest income, the taxpayer may be able to rely on the treaty provisions, subject to satisfying the relevant conditions.

The TRC helps establish that the individual is a tax resident of Country A. However, the taxpayer must also file Form 41 with the TRC attached before the Indian bank can apply the lower treaty rate on the interest.

Therefore, the taxpayer should not simply assume that the DTAA rate applies automatically. The treaty, the TRC, and Form 41 must all be in place.

What happens if an NRI does not have a TRC or does not file Form 41?

Without the required TRC and Form 41, an NRI may face difficulty substantiating eligibility for DTAA relief in India.

This becomes particularly important when claiming a lower withholding tax rate on income received from India. If the required documentation is not available at the time of payment, the payer must apply the standard domestic withholding rate, which is often significantly higher than the treaty rate.

For non-residents earning meaningful sums — for instance, royalty, technical service fees or licensing income — the gap between the domestic TDS rate and the applicable treaty rate can be substantial. Recovering the excess tax later through the income tax return process is possible but can take considerably longer than getting it right at source.

TRC is not the same as a tax clearance certificate

Another common misconception is that a TRC and a tax clearance certificate are the same document.

They are not.

A Tax Residency Certificate establishes a taxpayer’s tax residency in a particular jurisdiction for purposes such as treaty claims.

A tax clearance certificate serves a different purpose and should not be treated as a substitute for a TRC.

Common mistakes NRIs should avoid

1. Assuming citizenship determines tax residency

Tax residency is determined under applicable tax laws and treaty provisions. Citizenship alone does not establish eligibility for a DTAA benefit.

2. Treating the TRC as sufficient on its own

Since the Income-tax Act, 2025 came into force, a TRC alone no longer suffices. Form 41 must be filed alongside it — this is a mandatory, not optional, second step.

3. Relying on outdated references to Form 10F

Form 10F has been replaced by Form 41 under Rule 75 of the Income-tax Rules, 2026. Older guidance describing the Form 10F process no longer reflects the current compliance framework.

4. Ignoring the type of income

DTAA provisions differ depending on the nature of income. Interest, dividends, capital gains, royalties and other income can have different treaty provisions and different documentation nuances.

5. Waiting until the last moment

NRIs expecting significant income from India should arrange their TRC and file Form 41 before receiving the income or before a lower withholding rate is needed, since payers cannot apply treaty rates without both documents in hand.

Key takeaway

For NRIs, the Tax Residency Certificate remains an essential document for establishing foreign tax residency, but since 1 April 2026 it is no longer sufficient by itself. Under the Income-tax Act, 2025, DTAA relief requires both a TRC and Form 41, filed electronically with the TRC attached.

NRIs should also examine the relevant DTAA, identify the applicable article, and ensure Form 41 is filed for each relevant stream of income, rather than relying on the older Form 10F-based process that is no longer in effect.

If you are an NRI earning income from India, reviewing your TRC and Form 41 filing in advance can help avoid unnecessary tax withholding and compliance issues. Firms such as Neha R Gupta & Co. regularly assist NRIs with exactly this kind of cross-border compliance.

Disclaimer: This article has been prepared by Neha R Gupta & Co., Chartered Accountants, for general informational purposes only. It is not intended as, and should not be relied upon as, legal, tax or financial advice for any specific case. Tax laws, rules, rates and procedures may change, including through amendments introduced by the annual Finance Act. Readers should verify the applicable provisions for their specific circumstances or consult a qualified tax professional before taking any tax-related decision.