'I don't need a Tax Residency Certificate': What ITA 2025 actually says

'I don't need a Tax Residency Certificate': What ITA 2025 actually says

Every filing season a version of the same claim circulates in NRI WhatsApp groups: "I'm a UAE tax resident, so my Indian income is automatically exempt under the treaty — I don't need any certificate." Or its cousin: "Form 10F is all you need now, the Tax Residency Certificate is optional." Both are wrong, and both cost NRIs real money when the Indian payer deducts tax at the full 20-30% rate instead of the lower treaty rate. With the ITR due date of 31 July 2026 approaching for Tax Year 2025-26, this is the moment to get it right.

A Double Taxation Avoidance Agreement (DTAA) benefit is never automatic. It is a claim you must substantiate, and the single document India treats as the threshold proof is the Tax Residency Certificate (TRC). Without a valid TRC, you cannot lawfully claim a treaty rate, no matter how genuinely resident you are abroad. This is not a paperwork technicality invented by the tax office — it is written into the statute.

What the law actually says

The requirement to hold a TRC to claim treaty relief was introduced into the Income-tax Act, 1961 through Sections 90(4) and 90A(4). These sub-sections state plainly that a non-resident to whom a DTAA applies "shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident" of the treaty country is obtained by him from the government of that country. Section 90 covers treaties the Indian government has entered into; Section 90A covers agreements adopted by specified associations. The certificate they refer to is the TRC.

Section 90(5) then requires that the non-resident also provide "such other documents and information as may be prescribed" — and the prescribed additional document is Form 10F (which, under the ITA 2025 form renumbering, is administered alongside the new form series). The TRC and Form 10F are therefore not substitutes for one another. The TRC is the certificate your country of residence issues; Form 10F is the Indian self-declaration that fills any gaps left by that certificate (for instance if your foreign TRC does not state your tax identification number, period of residence, or address). You need both.

Under the Income Tax Act, 2025, which came into force on 1 April 2026, this architecture is carried forward intact. The residency test itself under Section 6 is unchanged in substance between ITA 1961 and ITA 2025 — the same four tests decide whether you are resident, RNOR, or non-resident. What ITA 2025 changes is vocabulary and form numbers: it speaks of the "Tax Year" rather than the old "Previous Year" and "Assessment Year," and it renumbers the compliance forms (for example, Form 15CA is now Form 145, Form 15CB is now Form 146, and Form 26AS is now Form 168). The treaty-relief conditions that make the TRC mandatory survive the transition. So the claim "the new Act did away with the certificate" is simply false.

Two directions of the TRC matter for NRIs, and people routinely confuse them:

First, when you are an NRI earning Indian income and want the payer or the assessing officer to apply a treaty rate, you obtain a TRC from the country where you live (UAE, USA, UK, Singapore, etc.) and furnish it in India.

Second, when you are an Indian resident earning foreign income and want relief in the other country, you obtain a TRC from India. The Indian TRC is applied for in Form 10FA and issued by the Indian tax authority in Form 10FB. Getting these two directions the wrong way round is one of the most common and expensive mistakes.

Practical implications for NRIs

Consider a concrete case. Priya lives and works in Dubai and holds fixed deposits in an NRO account in India that pay her ₹8 lakh of interest a year. The default TDS on NRO interest is 30% plus surcharge and cess — roughly ₹2.4 lakh withheld. The India-UAE DTAA caps tax on interest at 12.5%. If Priya furnishes a valid UAE TRC plus Form 10F to her bank before the interest is credited, the bank can deduct at 12.5% — about ₹1 lakh — instead of ₹2.4 lakh. That is a ₹1.4 lakh difference in cash flow every year, recoverable later only through a refund claim that ties up her money for months if she skips the certificate.

The numbers scale up sharply with capital gains and dividends. Dividend income paid to NRIs attracts 20% TDS under domestic law, but many treaties cap dividend tax at 10-15%. On royalty and fees for technical services, the domestic rate can be 20% while treaties frequently reduce it to 10%. In each case the reduced rate is unlocked only by producing the TRC. No TRC, no reduced rate — the payer is legally obliged to deduct at the higher domestic rate to protect itself.

There is a second, quieter risk. A TRC is issued for a specific period, usually a calendar or fiscal year of the issuing country. NRIs often obtain one TRC and reuse it for several years. If the period on the certificate does not cover the Indian Tax Year in which the income arose, the certificate does not support the claim. An assessing officer reviewing a treaty claim will check the dates first. A UAE TRC covering 2024 does not substantiate a treaty rate on interest credited in Tax Year 2025-26.

Finally, the UAE case carries a specific trap worth naming. Because the UAE historically levied no personal income tax, some residents assumed they could never obtain a "tax residency" certificate. The UAE Federal Tax Authority does in fact issue TRCs to qualifying residents, and Indian authorities have in several disputes examined whether a person is genuinely "liable to tax" in the UAE for treaty purposes. Holding the TRC is necessary but you should also be able to show substance — actual residence, days spent, a place of abode — because the certificate proves residence, not the genuineness of every claim built on it.

Where treaty claims actually break down

In practice, a treaty claim rarely fails because the taxpayer had no TRC at all. It fails at the margins, and knowing those margins is what separates a smooth refund from a year-long dispute.

The first failure point is the mismatch between the TRC and Form 10F. If your UAE TRC records your name or address one way and your Form 10F records it another, or if the tax identification number does not match, the assessing officer treats the documents as inconsistent and can deny the claim pending clarification. The two documents must reconcile field for field. This is why Form 10F should be filled from the TRC in hand, not from memory.

The second failure point is the period gap. Indian income is taxed by Tax Year (1 April to 31 March), while foreign TRCs are typically issued on a calendar year (1 January to 31 December) or the issuing country's own fiscal year. A single calendar-year TRC therefore straddles two Indian Tax Years and cleanly covers neither. The safe practice is to hold a TRC for each calendar year that overlaps the Tax Year in which income arose, so that every month of Indian income is covered by a certificate in force at the time.

The third failure point is timing relative to TDS. A TRC produced after the payer has already deducted tax at the domestic rate does not undo that deduction — it only supports a refund claim in your return. The whole cash-flow advantage of the treaty rate exists only if the certificate and Form 10F reach the payer before the income is credited. NRIs who obtain the TRC in June, after March interest has already been taxed at 30%, have effectively converted a lower withholding into an interest-free loan to the government until their refund is processed.

The fourth failure point concerns Indian residents claiming relief abroad. When you need India to certify your residence — for foreign income taxed overseas — you apply in Form 10FA to the jurisdictional assessing officer, who issues the certificate in Form 10FB. This is a distinct process from furnishing a foreign TRC in India, and confusing the two forms (10F, 10FA, 10FB) is a frequent source of delay. Form 10F is the self-declaration you file to support a foreign TRC; Form 10FA is the application you make to obtain an Indian TRC; Form 10FB is the Indian TRC itself.

Step-by-step: what to do

• Identify the direction you need. If you live abroad and earn Indian income, you need a TRC from your country of residence. If you live in India and earn foreign income, you apply in India using Form 10FA to receive Form 10FB.
• Obtain the foreign TRC from the correct authority. In the UAE, apply to the Federal Tax Authority. In the USA, file IRS Form 8802 to receive Form 6166. In the UK, request a Certificate of Residence from HMRC. Apply early — some authorities take weeks, and you need the certificate covering the relevant Tax Year, not last year's.
• File Form 10F online. Form 10F must now be filed electronically on the Indian income-tax e-filing portal, not merely emailed to the payer. You will need to register on the portal (a PAN helps; a workaround exists for those without a PAN). Enter your status, nationality, TIN, period of residence, and address exactly as they appear on the TRC.
• Furnish both documents to the payer before payment. Give the bank, company, or tenant deducting TDS a copy of the TRC and the filed Form 10F before the income is credited, so the lower treaty rate applies at source rather than through a later refund.
• Keep the documents with your return. Retain the TRC, Form 10F acknowledgement, and any supporting evidence of residence for the Tax Year. If your treaty claim is questioned, these are the first documents the officer will ask for.
• Diarise renewal. A TRC covers a defined period. Note when it expires and reapply so you are never claiming a treaty rate on a lapsed certificate.

FAQ

Is Form 10F enough on its own, without a TRC?
No. Form 10F is the prescribed supporting declaration under Section 90(5); the TRC is the primary certificate required under Section 90(4)/90A(4). You must hold both. Form 10F cannot substitute for a certificate your government of residence issues.

Does a UAE resident with no income tax still need a TRC?
Yes. The UAE Federal Tax Authority issues TRCs to qualifying residents, and India requires that certificate to grant treaty relief. Being tax-free at home does not make Indian treaty relief automatic — the certificate, plus genuine residence, is what supports the claim.

Did ITA 2025 abolish the TRC requirement?
No. ITA 2025 changed terminology ("Tax Year" replaces "Previous Year"/"Assessment Year") and renumbered forms, but it retained the treaty-relief conditions. A TRC remains mandatory to claim any DTAA benefit.

How long is a TRC valid, and can I reuse one for several years?
A TRC is valid only for the period stated on it, typically one year of the issuing country. You cannot reuse a single certificate across years — you need one covering each Tax Year in which you claim relief.

For your specific situation, book a consultation at harunraaj.com

TRC timing, the UAE substance question, and matching foreign certificate periods to Indian Tax Years are exactly where treaty claims are won or lost. For your specific situation, book a consultation at harunraaj.com.

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