TRC and its necessity

Income is said to be earned by a person in the country (source country):

- where he either renders his services or
- where he receives any income arising from an asset that is located in that country.

However, he may be based out of a different country (country of residence).

For determining the residential status in India, a person’s physical stay is considered for the relevant years. (To know how to determine your residential status in detail, refer to our explainer on the same)

A person who qualifies as a ‘Resident and Ordinarily Resident’ (ROR) is required to offer to tax all his income earned across the globe. Both his Indian and foreign income will be subject to tax. Also, such foreign income may be taxed in the source country as well. You will end up paying tax on the same income twice- once in the source country and once in the country of residence. To avoid such situations, the nations enter into DTAA to provide benefits to the taxpayers. The taxpayers can claim DTAA benefits at the time of paying taxes in such countries. Such DTAA benefit can be claimed only after he proves his domicile in such country, and in order to do so, a TRC helps in establishing the tax residency of such person. In essence, TRC is a document/certification issued by the tax authorities of the country of the person, confirming that such person is a resident of such country in that particular financial year. In brevity, TRC is proof of residency.

India has made it mandatory for non-resident taxpayers, who earn income from India and are desirous of claiming the treaty benefits, to furnish a valid TRC obtained by them from their respective country’s government. Similarly, tax authorities of various countries stress upon such TRC to determine the eligibility for availing tax treaty benefits.

How to Obtain TRC

TRC for Indian Resident taxpayer
An Indian resident earning income from other countries with which India has a DTAA can obtain a TRC from the Indian income tax department. Such Indian residents may submit the same in order to claim the tax treaty benefits. In order to obtain such a TRC, a person would need to make an application in Form No. 10FA to the Assessing Officer. On receipt of such an application and on being satisfied in this regard, the Assessing Officer would then issue a TRC in respect of such person in Form No. 10FB.

TRC for Non-Resident taxpayer
Any person who is a non-resident, as per Indian income tax law, shall obtain a TRC from the government of the country or the specified territory of which he claims to be a resident. This TRC must consist of the following details, namely:-

  • Name of the taxpayer;
  • Status of the taxpayer (individual, company, firm etc.);
  • Nationality (if the taxpayer is an individual) or country/specified territory of incorporation (in case of a company, LLP or Firm) or registration (in case of others);
  • Taxpayer's tax identification number as per the country or specified territory of residence or if he does not have such a number, then any unique number based on which the person is recognised as a resident by such country's government or the government of a specified territory;
  • Residential status for tax purposes;
  • Period during which the certificate is valid; and
  • Address of the taxpayer for the period for which the certificate is applicable;

TRC format could be different for different countries. Thus, if the TRC issued by the foreign government does not contain few or any of the details mentioned above, then the non-resident taxpayer would be required to furnish the details as mentioned above in Form 10F.

It is advisable for the non-resident taxpayer to keep and maintain such documents, as may be necessary to substantiate the information provided in Form 10F. Also, the income-tax authority may require the person to provide the said documents for its verification.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.