Indian residents earning income abroad and non-residents earning in India face potential double taxation on the same income. To address this issue, India has established double taxation avoidance agreements (DTAAs) with almost 100 nations. According to tax expert Pranav Sai S from ClearTax, individuals classified as 'Resident and Ordinarily Resident' (ROR) under income tax rules are liable to pay taxes on their global income, including salary, business income, capital gains, rental income, interest and other worldwide sources. Non-resident taxpayers are also taxed on income earned in India, while the same income may be taxable in the foreign country where they reside, creating double taxation scenarios. The India-UAE DTAA, signed in 1993, specifically covers income from salaries, business profits, dividends, interest, royalties, and capital gains, ensuring NRIs living and working in the UAE are not taxed twice on the same income.
A tax residency certificate (TRC) is issued by the income tax department to prove tax residency in India for a particular financial year. As reported by Mint, the certificate remains valid until the end of the financial year from its date of issue. To claim DTAA benefits, taxpayers must prove India is their country of residence by showing a TRC certificate. Non-resident taxpayers can also claim DTAA benefits by receiving a TRC from their home countries. Additionally, taxpayers must apply for TRC renewal before the end of each financial year to continue receiving DTAA treaty benefits. For UAE-based NRIs specifically, they must obtain a TRC from the UAE Federal Tax Authority and submit Form 10F to their Indian bank or income payer, while providing PAN card details and filing Indian income tax return (ITR-2 for NRIs) claiming DTAA relief.
Indian residents can apply for a tax residency certificate by filing Form 42 (previously Form 10FA) with the income tax department. According to the income tax portal, if the assessing officer is satisfied with the application, they will issue a TRC via Form 43 (previously 10FB). The certificate is issued to prove tax residency in India and is required to claim DTAA benefits. As per the latest user manual, Form 42 is divided into four panels: Particulars of Applicant, Details for Tax Residency Certificate, and Attachments A1, A2, and A3. All registered users having valid PAN on the e-Filing portal can apply for Tax Residency Certificate in Form No.42 by selecting 'Forms as per Income Tax Act, 2025' and clicking 'File now' for Form No.42.
Non-resident Indians (NRIs) must obtain a tax residency certificate from the foreign country's authorities or the country where they are a resident. As reported by Mint, NRIs need to provide details including name, assessee's status, Aadhaar number or PAN, nationality, Tax Identification Number (TIN), residential status period under Section 90(4) or Section 90A(4), and assessee's address in the foreign country. The format and contents of TRCs vary by country, and if the foreign government's certificate does not include required details, NRIs must furnish missing information separately through Form 41. The latest user manual confirms that NRIs must provide these specific details for their TRC application. For UAE-based NRIs, they must track their India visits carefully as you are an NRI for a financial year if you spend fewer than 182 days in India during that year, with the threshold amended from 2020 for Indian citizens earning over ₹15 lakhs from Indian sources who spend 120–182 days in India may be deemed residents.
Non-resident taxpayers must file Form 41 (previously 10F) when claiming relief under a DTAA as provided in section 159 of the Income Tax Act. According to the income tax portal, Form 41 ensures proper furnishing of supporting information required for correct claims. The form is available on the e-filing portal and can be submitted online. Taxpayers can also renew their TRCs before the end of the financial year by submitting updated documents, though this process varies across countries and requires advance planning. The latest user manual provides detailed instructions on how to complete Form 41 and submit it through the e-filing portal. For UAE-based NRIs specifically, they can apply to the Income Tax Officer for a lower TDS certificate if your actual tax liability is lower due to DTAA benefits - for interest income, the DTAA caps TDS at 12.5%, while for property sales in Kerala or India, TDS is deducted at 20% (long-term) or 30% (short-term) by the buyer.
