A Tax Residency Certificate (TRC) is an official document issued by the tax authorities of a country to certify that an individual or entity is a tax resident of that country for a particular financial year. It is primarily used to avail benefits under the Double Taxation Avoidance Agreement (DTAA) between India and other countries.
Why is a TRC Required?
▶ To Claim DTAA Benefits:
⇒ Reduces tax withholding (TDS) on foreign income, such as dividends, royalties, interest, or business income.
⇒ Prevents double taxation in both the source and resident countries.
▶ To Prove Tax Residency:
⇒ Establishes that an individual/entity is a tax resident of a specific country and is liable to pay taxes there.
▶ To Avoid Higher Tax Deduction in India:
⇒ Non-Residents (NRIs, foreign entities) need a TRC to claim lower TDS rates on Indian income.
Who Needs a TRC?
- Non-Resident Indians (NRIs) earning income from India (e.g., rental, capital gains, interest, dividends).
- Foreign Companies & Investors receiving payments from India under DTAA provisions.
- Indian Residents with Foreign Income to claim DTAA benefits in the foreign country.
Habco provides expert services in obtaining a Tax Residency Certificate from the Income Tax Department.