When do you need a tax residency certificate to claim lower tax rate under DTAA for Tax Year 2026

For Indians earning income from overseas, securing a tax residency certificate is essential to avail benefits under the Double Taxation Avoidance Agreement (DTAA). To acquire this certificate, taxpayers must complete Form 42 online via the income tax e-filing portal. This form necessitates accurate details and supporting documents to confirm residency status.

For Indian residents generating income from abroad, a tax residency certificate (TRC) can be an important document for you if you want to claim benefits under a double taxation avoidance agreement (DTAA). TRC can help you establish your residential status, which in turn helps you to claim lower tax under DTAA.

What is TRC?A Tax Residency Certificate (TRC) is a document issued by the tax authorities of a country certifying that a person is a tax resident of that country for a specified period. It is generally used as proof of tax residency when a person earns income from another country and wishes to claim benefits available under a Double Taxation Avoidance Agreement (DTAA).

Chartered Accountant Suresh Surana said to ET Wealth Online that an Indian resident earning income from another country may be required to provide proof of Indian tax residency to claim benefits available under India's DTAA with that country. Depending on the relevant DTAA, such benefits may include a lower rate of tax, exemption from tax in certain cases, or relief from double taxation.

For this purpose, the resident taxpayer may obtain a TRC from the Indian Income Tax Department and furnish it to the relevant foreign tax authority or payer as evidence of Indian tax residency. As per Rule 75 of the Income-tax Rules , 2026 (corresponding to Rule 21AB of the Income Tax Rules, 1962), a resident taxpayer can apply for a TRC in Form No. 42 (erstwhile Form No. 10FA), and the TRC is issued by the Income tax authorities in Form No. 43 (erstwhile Form No. 10FB).

When NRIs need TRC?NRIs may also require a TRC. However, they would generally obtain the TRC from the country where they are tax residents. For instance, if an NRI is a tax resident of the UAE and earns income from India, the individual may obtain a UAE TRC and provide it in India to claim the benefits available under the India-UAE DTAA, subject to the applicable conditions.

Surana says that the requirement and practical benefit of a TRC depend on the nature of the cross-border income and the country in which treaty benefits are being claimed. Some of the following instances illustrate how a TRC is commonly used in practice:

* NRI earning income from India: Consider an NRI residing in the UAE who earns interest on bank deposits, receives dividends from Indian investments, or earns rental income from property situated in India. To claim the benefits available under the applicable DTAA, the NRI is required to furnish a TRC issued by the country of tax residence, along with the prescribed information / documents. Depending on the relevant DTAA and nature of income, this may enable the NRI to claim a beneficial tax treatment compared with that available under Indian domestic tax law.

* Indian resident earning income overseas - Consider an Indian resident who earns income from a foreign country, such as salary, consultancy fees, dividends or interest, or an Indian freelancer / business providing services to overseas customers. The foreign payer or tax authority may require evidence that the individual or business is a tax resident of India before allowing benefits under the applicable DTAA.Surana says that by obtaining and furnishing an Indian TRC, the taxpayer can establish Indian tax residency and, depending on the nature of income and the relevant DTAA, may be eligible for a lower or nil rate of tax in the foreign country, thereby reducing or avoiding tax withholding overseas.

How to get the TRC?

Form 42 is an application filed by a resident taxpayer to obtain a TRC from the income tax department. To obtain a TRC, a taxpayer who is a tax resident in India is required to submit an online application using Form No. 42 on the income tax e-filing portal.

The process for filing Form 42 is the following:

* Log in with PAN (Permanent Account Number) on the income tax e-filing portal

* Choose the tax year for which the TRC is required

* Fill Form 42 specifying the period in the tax year for which the TRC is applicable; TRC is issued only tax-year-wise. If the period for which TRC is required exceeds the tax year, another Form 42 for the relevant tax year is to be filed.You need to upload the following documents:

* Passport (for individuals) or proof of stay

* Certificate of incorporation/registration (for other than individuals)

* Any other relevant informationOnce you fill in the form and upload the documents, the form will be verified.

Any resident taxpayer who claims tax residency in India is required to file a tax residency certificate to claim DTAA benefits or fulfill requirements in other countries. Even though there is no due date to file Form 42, a taxpayer is restricted to filing one form per tax year.

What is the due date to submit TRC?There is no prescribed due date for filing Form No. 42 of IT Rules 2026, for obtaining a TRC. The brochure issued by the Income-tax Department also clarifies that there is no due date for filing the form and that it may be filed as per the taxpayer's requirement, subject to the condition that the TRC is issued only once for a tax year.

Surana says: "A resident taxpayer may apply for a TRC whenever it is required for claiming benefits under an applicable DTAA or for satisfying tax residency / documentation requirements in a foreign jurisdiction."

Structure of TRC formAccording to an income tax brochure, the first part of Form 42 requires details of the taxpayer, such as name, PAN, communication address, email, etc. The second part requires details of tax residency, including the period for which TRC is required, the basis on which resident status is claimed, the address during the period TRC is desired, etc. The options are provided as to the documents to be uploaded with the Form. The final part is the verification statement.