Tax Residency Certificate (TRC) for NRIs 2026: Eligibility, Benefits & Process

NRIs earning income in India may have to pay tax in both India and their country of residence. A Tax Residency Certificate helps avoid this problem by allowing them to claim benefits under the Double Taxation Avoidance Agreement. A TRC is an official document issued by the tax authorities of the country where the NRI lives. Without it, income earned in India may be taxed at higher rates, and DTAA benefits may not be available. The TRC is obtained from the country of residence and is valid for one financial year. This blog will be a reader’s guide to Tax residency certificates, who can apply, their benefits, and the compliance rules and penalties.

What Is a Tax Residency Certificate (TRC)?

A Tax Residency Certificate or TRC is an official document issued by the tax authorities of a country to confirm the tax residency status of an individual or entity in that country. It is mandatory for NRIs, foreign investors, and businesses operating across borders to claim benefits under a Double Taxation Avoidance Agreement to avoid paying tax twice on the same income.

Under Section 90(5) of the Income Tax Act, 1961, read with Rule 21AB, a TRC must be submitted along with Form 10F to avail DTAA benefits on income earned in India.

Contents of a Tax Residency Certificate:

• Name & details of the assessee
• Tax Identification Number or equivalent
• NRI status & nationality of applicant
• Period of tax residency
• Statement of residency
• Purpose of issuance

Why TRC Matters for NRIs?

Without a TRC Certificate, an NRI is required to pay taxes at higher domestic rates on income earned in India, often up to 30% plus applicable surcharge and cess. A TRC serves as official proof of tax residency and can help NRIs claim relief under the Double Taxation Avoidance Agreement.

• Avoids double taxation: Without a TRC, the same income may be taxed in both India and the country of residence. A TRC helps NRIs claim DTAA benefits, ensuring income is either taxed once or that tax credits are available.
• Reduces Tax Deduction at Source: In the absence of a TRC, Indian payers deduct tax at higher domestic rates. With a valid TRC and Form 10F, NRIs can avail of lower DTAA rates, typically 10-15%, depending on the treaty and the nature of the income.
• Mandatory for claiming DTAA benefits: Under the Income Tax Act, 1961, submitting a TRC along with Form 10F is required to claim treaty benefits. Without it, higher tax rates apply for NRIs.
• Facilitates repatriation of funds: A TRC Certificate is required as proof of tax compliance when repatriating funds, such as sale proceeds, up to the permitted limits.
• Simplifies tax compliance: Holding a Tax Residency Certificate establishes a clear tax residency status, reduces the risk of disputes with tax authorities, and simplifies tax filing.

When is TRC required for NRIs?

Under the Income Tax Act, 1961, a Tax Residency Certificate is required for NRIs if they want to claim benefits under the Double Taxation Avoidance Agreement. It helps reduce TDS and prevents the same income from being taxed in both India and the NRI's country of residence.

Common Situations Where TRC is Required:

• When claiming lower TDS rates on income, such as interest, dividends, or royalties
• When earning rental income or capital gains in India while residing abroad
• When receiving salary or professional income from India while being a tax resident of another country
• When claiming DTAA benefits to avoid double taxation.

When TRC is NOT Required?

• When DTAA benefits are not being claimed
• If income is fully taxable in India at applicable domestic rates
• In cases where alternative documentation is accepted (subject to authority requirements)

Is TRC Mandatory for NRIs?

A Tax Residency Certificate is not mandatory for all NRIs. However, under Sections 90(4) and 90A(4) of the Income Tax Act, it becomes mandatory if an NRI wants to claim DTAA benefits. It serves as proof of tax residency in a foreign country and helps avoid double taxation on the same income in India and the country of residence.

Example: An NRI residing in the USA earns ₹10 lakh as rental income from a property in India. If no TRC is submitted, the tenant or payer may deduct TDS at the domestic rate of 30%, resulting in a deduction of ₹3 lakh. However, by submitting a valid TRC along with Form 10F, the NRI can claim DTAA benefits under the India-USA treaty and be eligible for a lower TDS rate, for example, 15%, thereby reducing their tax deduction to ₹1.5 lakh. This lowers an NRI’s total tax burden and prevents double taxation.

Who is Eligible for a Tax Residency Certificate?

A TRC Certificate can be obtained by individuals, companies, or entities that qualify as tax residents of a foreign country and earn income in India. For NRIs, eligibility depends on meeting the tax residency rules of their country of residence and maintaining proper tax compliance there.

Eligibility Checklist for NRIs:

• Stayed in the foreign country for the required number of days (183 days or more, depending on the country)
• Holds valid proof of tax residency (as per local laws)
• Possesses a TIN or equivalent tax identification
• Has filed or is liable to file tax returns in a foreign country
• Earns income in India and seeks DTAA benefits

What are the Documents Required for a TRC Application?

To apply for a Tax Residency Certificate, an NRI is required to meet the eligibility criteria and submit the following documents to the tax authorities in their country of residence:

• Proof of identity (passport or equivalent)
• Proof of overseas address
• Copies of Income Tax Returns
• Proof of income
• Cover letter stating the purpose of the TRC request

Step-by-Step Process to Apply for Tax Residency Certificates 

The application process for a Tax Residency Certificate involves several steps that can be completed either online or offline via the tax portal of an NRI’s country of residence. The step-by-step process includes:

• Step 1: Determine eligibility: Confirm your residential status for the relevant financial year in your country of residence to ensure you qualify for a TRC.
• Step 2: Apply for TRC: Submit the application through your country’s tax authority portal (HMRC in the UK or IRS in the US). Provide personal details and income details, and complete any country-specific forms required.
• Step 3: Submit supporting documents: Upload all required documents, including proof of identity, proof of overseas address, proof of income tax returns, and a cover letter stating the purpose of the TRC request.
• Step 4: Verification & issuance: The foreign tax authority will then review your application and documents. Once verified, the TRC will be issued by the authorities of your country of residence and will be valid for one financial year.
• Step 5: Submit TRC in India: Once received, you can then claim DTAA benefits on your Indian-source income by submitting TRC along with Form 10F on the Income Tax e-filing Portal.

Latest TRC & DTAA Updates for NRIs in 2026

Tax rules related to TRCs and DTAs continue to evolve, with a stricter focus on transparency and documentation. Recent Income Tax and Union budget updates have introduced stricter compliance requirements for NRIs claiming DTAA benefits. The latest updates for 2026 include:

• Mandatory online filing of Form 10F: As per Rule 21AB, Form 10F must now be filed electronically on the Income Tax portal.
• Increased scrutiny on DTAA claims: Tax authorities can reject DTAA benefits if documentation is incomplete or inconsistent.
• Acceptance of digital TRC: Digital TRCs are accepted, provided they are valid and verifiable.
• PAN and TRC linking: Details in the TRC must match PAN records for effortless processing of DTAA claims.
• Global tax compliance norms: India follows international standards, such as OECD guidelines, to enhance monitoring of its cross-border income.

TRC vs Form 10F vs Self-Declaration

Where TRC and Form 10F are mandatory documents for NRIs to claim the Double Taxation Avoidance Agreement in India, a self-declaration is not legally mandated but is commonly required by Indian payers for compliance.

Key Compliance Rules & Penalties for Tax Residency Certificates

The submission of a TRC certificate is mandatory under Section 90(4) of the Income Tax Act, 1961, for NRIs seeking to claim DTAA benefits. Without a valid TRC and Form 10F, TDS is liable to be deducted at higher domestic rates.

Compliance Rules for Tax Residency Certificates

• Mandatory submission: A valid TRC must be submitted under Section 90(4) and 90A(4) of the Income Tax Act, 1961, to claim DTAA benefits.
• Prescribed particulars: The TRC should contain all required details. If any information is missing, Form 10F must be submitted under Rule 21AB.
• Validity for relevant year: The TRC must relate to the specific financial year in which income is earned.
• Issued by foreign authority: Under Section 90(4) of the Income Tax Act, the TRC must be obtained from the tax authorities of the country of residence.
• Consistency with filings: Under Section 139, details in the TRC should align with the income reported in Indian tax returns.

Penalties for Non-Compliance:

• Without TRC and Form 10F, TDS may be deducted at domestic rates up to 30% plus surcharge and cess.
• Penalty may be levied up to the amount of tax not deducted or paid under Section 271C
• A penalty of ₹1 lakh may apply for failure to furnish the required information related to Form 15CA/CB under Section 271-I
• Interest at 1.5% per month is charged for failure to deduct or deposit TDS.
• Prosecution under Section 276B applies to the payer in cases of willful failure to deposit TDS.

Common Mistakes NRIs Make with Tax Residency Certificates

Even minor TRC compliance mistakes can lead to higher TDS, denial of DTAA benefits, or delays in refunds. Common mistakes NRIs make while filing for a Tax Residency Certificate include:

• Applying late: Delayed submission of a TRC can result in higher TDS deduction at domestic rates, as payers will not be eligible for DTAA benefits in time.
• Not renewing TRC annually: A TRC is valid for one financial year. Failure to renew it can result in the denial of DTAA benefits for subsequent periods.
• Ignoring Form 10F: Under Section 90(5) read with Rule 21AB of the Income Tax Act, Form 10F is required if the TRC lacks prescribed details. Not submitting it can result in the loss of DTAA benefits and a higher TDS.
• Incorrect country declaration: Declaring the wrong country or a mismatch with actual tax residency can lead to rejection of DTAA claims and scrutiny from tax authorities.
• Assuming NRE income doesn’t need TRC: While certain NRE incomes like interest are exempt in India under certain conditions, TRC is still required by banks or payers to apply correct tax treatment or confirm eligibility.

Expert Tips to Avoid Double Taxation

The best way for NRIs to avoid double taxation is to apply for a Tax Residency Certificate from their country of residence and submit it along with Form 10F to claim DTAA benefits in India. Some expert tips to avoid double taxation include:

• Apply for TRC and submit Form 10F before income accrual to avoid higher TDS deduction.
• Ensure correct tax residency status as per your country’s tax laws.
• Keep proper documentation, including TRC, Form 10F, tax returns and supporting proofs ready.
• Consult a Chartered Accountant to apply the correct DTAA rates.
• Review DTAA provisions carefully before claiming benefits.

NoBroker for Hassle-free Tax Residency Certificates

Not having a valid or correctly issued Tax Residency Certificate can result in higher TDS, loss of DTAA benefits, and even double taxation. The easiest way to avoid this is to ensure your documentation is accurate, obtained from the correct authority, and submitted on time to claim eligible benefits. For a hassle-free process, you may need a trusted companion. NoBroker is a leading tax service provider for NRIs. At NoBroker, our experienced tax advisors offer expert guidance and assistance with tax-related services, including Tax Residency Certificates and Form 10F applications for NRIs across 150 countries. NoBroker is a one-stop solution for all NRI legal assistance, tax and documentation needs.

DTAA Treaties Between India and Other Countries