A Tax Residency Certificate (TRC) is a crucial document for Non-Resident Indians (NRIs) that helps them avoid double taxation and claim tax benefits under DTAA (Double Taxation Avoidance Agreement). If you earn income in India and reside in another country, a TRC ensures you are taxed fairly and prevents unnecessary tax deductions.
1. What is a Tax Residency Certificate (TRC)?
A Tax Residency Certificate (TRC) is an official document issued by the tax authorities of your country of residence, proving that you are a tax resident of that country.
✔ Required for NRIs to claim tax relief under DTAA
✔ Confirms tax residency in a foreign country
✔ Essential for lower TDS (Tax Deducted at Source) on income earned in India
🔹 NRIs must obtain a TRC from their country of residence to avail tax benefits in India.
2. Key Benefits of TRC for NRIs
A) Avoids Double Taxation (DTAA Benefits)
Many NRIs earn income in India (e.g., rent, interest, dividends, capital gains, etc.) while residing abroad. Without a TRC, they may be taxed twice—once in India and again in their country of residence.
✔ With a TRC, NRIs can claim DTAA benefits, ensuring they pay tax only once.
B) Lower TDS on Income Earned in India
Income earned in India is subject to TDS (Tax Deducted at Source), often at high rates for NRIs. However, with a TRC and DTAA benefits, the TDS rate can be significantly reduced.
Example of DTAA TDS Benefits for NRIs
| Income Type | Standard TDS Rate for NRIs | TDS Rate Under DTAA (with TRC) |
|---|---|---|
| Interest on NRO Account | 30% | 10-15% (Varies by country) |
| Dividend Income | 20% | 10-15% (Varies by country) |
| Capital Gains (Equity) | 15% (Short-term) | DTAA rates may apply |
| Rental Income | 30% | DTAA rates may apply |
✔ With a TRC, NRIs can pay lower TDS and avoid excess tax deductions.
C) Repatriation of Funds Without Excess Tax Deduction
NRIs often transfer money from India to their resident country. If the income earned in India has already been taxed under DTAA, a TRC ensures that there is no extra tax deduction while repatriating funds.
✔ A TRC simplifies the process of moving funds across borders.
D) Proof of Tax Compliance for Global Investments
If NRIs invest in foreign stocks, real estate, or businesses, foreign tax authorities may ask for proof of tax compliance in India. A TRC serves as:
✔ Proof that tax has been paid in India
✔ Avoids unnecessary tax scrutiny in the resident country
🔹 A TRC helps NRIs prove they are meeting their tax obligations.
3. How to Obtain a Tax Residency Certificate (TRC) as an NRI?
NRIs must apply for a TRC from their resident country’s tax authority. The process varies by country but generally involves:
Step 1: Apply to the Tax Authority of Your Resident Country
- Submit a request to the tax department of your country
- Provide proof of residency (passport, visa, rental agreements, etc.)
- Attach tax payment records, if applicable
Step 2: Receive the TRC from Your Resident Country
- Once approved, the tax authority issues the TRC
- The certificate typically mentions name, address, residency period, and tax ID
Step 3: Submit the TRC to Indian Tax Authorities
- Submit the TRC to your Indian bank, employer, or investment platform
- Fill out Form 10F (if required)
- Claim DTAA benefits while filing taxes in India
🔹 Some countries issue TRCs online, while others require a physical application.
4. FAQs on TRC for NRIs
1. Is a TRC mandatory for NRIs to claim DTAA benefits?
✅ Yes, without a TRC, NRIs cannot claim lower TDS or tax relief under DTAA.
2. How often should NRIs renew their TRC?
✅ Most TRCs are valid for one financial year and must be renewed annually.
3. Can an NRI obtain a TRC from India?
❌ No, NRIs must get a TRC from their resident country, not India.
4. What happens if an NRI doesn’t have a TRC?
🚧 Without a TRC, Indian authorities may deduct TDS at the maximum rate, and NRIs may face double taxation.
5. Do banks in India accept digital TRCs from foreign countries?
✅ Yes, most Indian banks accept digitally issued TRCs, but some may request a notarized copy.
5. Final Thoughts: Should NRIs Get a TRC?
Absolutely! A Tax Residency Certificate (TRC) is essential for NRIs to:
✔ Avoid double taxation
✔ Claim lower TDS on Indian income
✔ Easily repatriate funds
✔ Ensure smooth global tax compliance
🚀 If you’re an NRI earning in India, obtaining a TRC is a smart financial move!
