What is DTAA?
DTAA stands for Double Taxation Avoidance Agreement. It is an agreement between two countries with an objective to avoid taxation of the same income in both countries. India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 86 (as per latest reports) countries as of now.
For example, an NRI residing in “A” country is maintaining NRO Account with a bank in India. The interest earned on balances in this account is considered as the NRIs income originating in India and accordingly taxed in country “A” resulting in double taxation of the same income in both countries. If India has DTAA with country “A”, this income will be taxed at the rate prescribed in the agreement*. Else, it will be taxed at 30.9 % (the existing withholding tax).*subject to timely submission of prescribed documents to the tax deductor.
How to avail benefits under the DTAA?
As per the provisions of the Income Tax Act, 1961 it is mandatory to submit Tax Residency Certificate (TRC) for claiming the benefits under Double Taxation Avoidance Agreement (DTAA). NRIs who wish to avail DTAA benefit have to mandatorily provide 'Tax Residency Certificate (TRC)' to the deductor (Bank). This is applicable for all NRI customers who wish to avail DTAA benefit with effect from 1st April 2013.
NRIs can avail benefits under the DTAA by timely submission TRC along with Form-10F & PAN No.
The certificate containing above details should be duly verified by the Government of the country or the specified territory of which the NRI claims to be a resident for the purposes of tax
How to obtain the TRC?
You can download FORM-10F available at website and approach the tax/government authorities of the overseas where you reside to get the form (TRC) certified.
Kindly note that no other document in lieu of the TRC shall be considered for availing the benefits under DTAA.
Do I need to submit these documents every year to avail benefits under the DTAA?
DTAA benefit is extended on an annual basis. Therefore, NRIs are required to provide all the requisite documents at the beginning of every Financial year to continue availing the benefit under DTAA.
What happens if I do not submit TRC and other documents to the bank within stipulated timelines?
In case the prescribed documents are not submitted to the bank within stipulated timelines, the bank will have to deduct interest earned on NRO deposits at the presently applicable rate of 30.9 %* (Subject to revision by the tax/government authorities)