A Tax Residency Certificate (TRC) for NRIs & DTAA Benefits is an official document issued by the tax authorities of your country of residence (USA, Canada, UK, etc.) to prove that you are a tax resident there. This certificate is essential for NRIs who wish to claim tax relief in India under the DTAA (Double Taxation Avoidance Agreement).
Without a TRC, your income in India may be taxed at full rates instead of the lower DTAA rates, leading to higher tax liability and delayed tax refunds. This guide will provide insights into why a TRC is essential, how to obtain it, and how it impacts NRI taxation. Brivan Consultants specializes in assisting NRIs with tax planning, DTAA claims, and compliance, ensuring a hassle-free process for securing a TRC and optimizing tax liabilities.
For a detailed understanding of how DTAA benefits NRIs and helps avoid double taxation, refer to our comprehensive guide here: How NRIs Can Avoid Double Taxation with DTAA
Residency Status & Taxation: Where Do You Stand?
Before applying for a TRC, it’s essential to determine your Indian tax residency status. Indian tax laws categorize individuals as:
- Resident & Ordinarily Resident (ROR) – Taxed on global income
- Resident but Not Ordinarily Resident (RNOR) – Taxed on Indian income + some global income
- Non-Resident (NRI) – Taxed only on Indian-sourced income
For NRIs, maintaining NRI status is critical to reducing taxes and claiming DTAA benefits. If you spend more than 120 days in India, your residency status change, making you liable for higher taxes on global income. However, there are speculations that this period may be further reduced, making it even more challenging for NRIs to maintain their tax-exempt status in India.
How TRC Helps NRIs Avoid Double Taxation
Key Benefits of Getting a TRC
- Lower TDS on Rental & Investment Income – Without a TRC, NRIs earning rental income or capital gains in India face upto 17.81% TDS deductions based on property value. With a TRC, you can reduce this significantly based on DTAA rates.
- Lower Capital Gains Tax on Property Sales – Selling property in India? TRC helps reduce capital gains tax and claim foreign tax credits in your resident country.
- Repatriate Sale Proceeds Easily – Indian banks require a TRC to process repatriation of property sale proceeds up to $1 million per year.
- Avoid IRS Scrutiny in the US – US-based NRIs reporting Indian income must provide a TRC to claim DTAA tax credits and avoid IRS penalties.
For more details on NRI taxation and DTAA, read our guide: How NRIs Can Avoid Double Taxation with DTAA
Step-by-Step Guide: How NRIs Can Obtain a Tax Residency Certificate (TRC)
Follow these steps to apply for a TRC from the tax authorities of your resident country (USA, Canada, UK, etc.):
1️. Apply for TRC in Your Resident Country
- USA: Apply through the IRS using Form 8802
- Canada: Apply through Canada Revenue Agency (CRA) using Form NR73
- UK: Apply through HMRC
- Australia: Apply through Australian Taxation Office (ATO)
Documents Required:
- Proof of residency (bank statements, lease agreements, utility bills)
- Tax returns of the previous financial year
- Social Security Number (SSN) or Tax Identification Number (TIN)
2️. Submit TRC to Indian Authorities & File Form 10F
Once you receive the TRC from your home country, you must submit it to the Indian Income Tax Department along with Form 10F (if required).
What is Form 10F?
Form 10F is an additional document required for NRIs without a PAN card in India to claim DTAA benefits. It must be submitted online via the Income Tax e-filing portal.
Key details in Form 10F:
- Full name & registered address
- PAN (if available)
- Tax Identification Number (TIN)
- TRC issuing country & validity period
Renewing a TRC: Keeping Your DTAA Benefits Active
A Tax Residency Certificate is valid for one financial year and must be renewed annually to continue claiming tax relief. Ensure timely renewal by submitting updated documents to your country’s tax authorities.
TRC & Property Sales: Why NRIs Must Get It Before Selling Their Property
Selling property in India? Without a TRC & Form 10F, NRIs face:
- Higher TDS deductions (up to 17.81%) on sale proceeds
- Delayed tax refunds due to incorrect tax deductions
- Challenges in repatriating sale funds abroad
Solution: Obtain a TRC in advance & work with Brivan Consultants for expert assistance in TDS refunds & repatriation compliance.
Why Choose Brivan Consultants?
At Brivan Consultants, we specialize in NRI taxation, property sales, and DTAA compliance. Our experts ensure that NRIs in the USA & Canada receive maximum tax benefits while selling property or managing investments in India.
🔹 Expert DTAA & Tax Planning – Reduce your tax liability with strategic planning
🔹 Hassle-Free TRC & Form 10F Processing – Avoid delays in tax claims
🔹 TDS Refund Assistance – Recover excess tax deducted from property sales
🔹 Smooth Repatriation Process – Legally transfer funds to the USA or Canada
Brivan Consultants has helped thousands of NRIs navigate Indian tax laws, ensuring stress-free transactions and maximum tax savings.
Final Thoughts
For NRIs in the USA & Canada, obtaining a Tax Residency Certificate (TRC) for NRIs & DTAA Benefits is essential for minimizing taxes and securing DTAA benefits. From reducing TDS deductions on rental income to saving lakhs on property sales, a TRC ensures your hard-earned money stays with you—not with the tax authorities.
At Brivan Consultants, we handle everything remotely, ensuring you don’t have to travel to India. Let’s simplify your tax & financial compliance today!
Frequently Asked Questions (FAQs)
Q1: What is tax residency in India for NRIs?
In India, an individual’s tax residency status is determined based on the number of days spent in the country. NRIs are classified as Non-Residents if they:
- Stay in India for less than 182 days in a financial year.
- Stay in India for less than 120 days (if earning more than ₹15 lakh in India) and have stayed for less than 365 days in the last four years to maintain NRI status.
If these conditions are not met, the individual may be classified as Resident but Not Ordinarily Resident (RNOR) or Resident and Ordinarily Resident (ROR), making them liable for global taxation.
Q2: Why is a Tax Residency Certificate (TRC) required in India?
A Tax Residency Certificate (TRC) is essential for NRIs to claim tax benefits under the Double Taxation Avoidance Agreement (DTAA) and prevent double taxation on their Indian income. Without a TRC, NRIs may face higher TDS deductions and may not be eligible for DTAA tax relief when filing returns in their resident country. TRC also helps with repatriation of funds, compliance with financial institutions, and smooth cross-border taxation.
Q3: What are the new tax residency rules for NRIs in India?
The Indian government has introduced stricter residency rules for NRIs, including:
- The 60-day rule has been replaced with a 120-day threshold for NRIs earning over ₹15 lakh in India.
- If an NRI stays in India for 120 days or more in a tax year and has stayed for 365+ days in the past four years, they will be classified as RNOR, making them liable for tax on certain foreign income.
- NRIs who maintain shorter stays in India can continue to benefit from their non-resident tax status and avoid additional tax burdens.
Q4: How long is a Tax Residency Certificate (TRC) valid in India?
A Tax Residency Certificate (TRC) is valid for one financial year and must be renewed annually to continue claiming DTAA benefits. Failure to renew the TRC on time may result in higher TDS deductions and loss of tax benefits.
Q5: How can NRIs maintain their NRI status in India?
To retain NRI status, individuals should:
- Limit their stay in India to less than 182 days in a financial year.
- If earning more than ₹15 lakh in India, ensure their stay does not exceed 120 days in a tax year and less than 365 days over the past four years.
- Maintain financial ties abroad and ensure they do not become liable for global taxation in India by exceeding the stay limits.
