How to obtain a TRC for claiming tax relief under double taxation avoidance agreement

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SummaryProvisions of Tax Residency Certificate (TRC) require specified people to obtain this certificate from their home country for claiming relief under the Double Taxation Avoidance Agreements (DTAA) that India has entered into with the other country.

Provisions of Tax Residency Certificate (TRC) require specified people to obtain this certificate from their home country for claiming relief under the Double Taxation Avoidance Agreements (DTAA) that India has entered into with the other country. These rules have been introduced to ensure that people don’t misuse the provisions of DTAA.

Essentially, a TRC classifies a person as a resident of one country and makes him eligible to claim relief under the DTAA of the other country. This requirement is applicable for FY13 and onwards.

TRC is required for those foreign nationals who have come to India for a specified period and are claiming a relief under the DTAA on their Indian income. It is also applicable to Indians who are going abroad and the host country requires a TRC to allow tax exemptions there.

A foreign national claiming a relief under DTAA is required to make an application in the home country to its tax authorities (or any other designated authorities) and obtain a TRC. Earlier, the application for a TRC was required to contain the name of the taxpayer, status, nationality, taxpayer’s tax-identification number, residential status, period for which the certificate is applicable, etc. There were many countries which didn’t issue TRC providing all these details and, in such cases, relief under DTAA was not available. This caused a lot of hue and cry, prompting the government to recently delete this requirement when the proposals were passed in the Lok Sabha.

Taxpayers who are residents of India can now obtain a TRC by making an application in Form 10FA to the tax authorities. The form requires information such as name, address of taxpayers, basis for claiming residency in India, purpose and the period for which TRC is required. Upon receipt of the application form, along with the supporting documents, the tax authorities will verify the information and then issue a TRC in Form 10FB.

The Indian tax return filing deadline is July 31 and the TRC should be obtained if you are claiming a relief under DTAA. Obtaining a TRC can take a few weeks to a month, depending upon the country in which it is applied from. Hence, a person who is coming to India should initiate the process now, so that he is able to obtain it before the due date of filing his return of income.

Last week, the proposals of Budget2013 were passed in the Lok Sabha with certain amendments. It was clarified that TRC would be necessary but not a sufficient condition for claiming relief under the DTAA, which has made many people happy.

The writer is a director with KPMG. The views expressed are personal

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