To avoid double taxation on Indian income, NRIs should (1) confirm non-resident status; (2) give their bank/broker a Tax Residency Certificate (TRC) and Form 10F so the DTAA rate is applied at source; and (3) file an Indian ITR to claim any refund. India requires a TRC to claim treaty relief; the temporary relaxation for manual Form 10F ended on 30 Sept 2023. (Income Tax India)
Why this matters
When you earn income in India while residing abroad (interest, dividends, rent, capital gains), both India (source) and your country of residence may tax the same income. The Double Taxation Avoidance Agreement (DTAA) and proper documentation ensure you’re taxed once, at the lower treaty rate wherever applicable. (IRS)
NRI basics: what qualifies and what changes
- NRI for tax purposes is determined by Section 6 residency tests. Your status drives which incomes India can tax.
- Key principle: India taxes income received or accruing in India for non-residents; your resident country taxes your global income (often with a foreign tax credit there).
- Foreign Tax Credit (FTC) in India is largely for residents under Rule 128; NRIs typically claim the credit in their country of residence, not in India. (Income Tax India)
The legal backbone (what the law requires)
- TRC is mandatory to claim DTAA relief: Section 90(4) and 90A(4) state that a non-resident cannot claim treaty relief without a certificate of residence (TRC) from the government of the country of residence.
- Form 10F: CBDT mandated e-filing; a manual filing relaxation for non-residents without PAN was extended till 30 Sept 2023 (post which e-filing applies). Keep a TRC and 10F to support treaty claims. (Income Tax India)
- Evidence content: The 2013 notification lists particulars required in Form 10F (e.g., tax ID, period of residence). (India Code)
What incomes are commonly impacted—and typical treaty outcomes
| Income from India (for NRIs) | What usually happens under DTAAs* |
|---|---|
| Bank interest / debt interest | Withholding capped by treaty (e.g., India–USA: 10% for bank loans to financial institutions; 15% otherwise). (IRS) |
| Dividends | Treaty cap (varies by treaty; payer still withholds, then you credit in residence country). (IRS) |
| Capital gains on Indian shares/property | Often taxable in India (source retains rights in many treaties—check your treaty). (IRS) |
| NRE/FCNR interest | Exempt in India if conditions met (Sec 10). Use NRE/FCNR where eligible. (Income Tax India) (SBI) |
*Treaty articles and rates vary by country; always verify your specific treaty.
The 3-step playbook to avoid double taxation
1) Get documentation right—before income is paid
- Tax Residency Certificate (TRC) from your resident country’s tax authority (for the Indian FY in question).
- Form 10F (e-file on the Income-tax portal).
- Provide both to the bank/broker/tenant so they withhold at the DTAA rate instead of the higher default Indian rate. (Income Tax India)
2) Confirm the correct rate at source
- Example: Under India–USA DTAA Article 11, interest tax at source is max 10% for bank loans to financial institutions and 15% in other cases (if you’re the beneficial owner). Provide TRC + 10F to have the payer apply this cap. (IRS)
3) File the Indian ITR (if tax was over-withheld)
- If your bank deducted TDS at 30% on NRO interest but treaty limits it to 15%, file your ITR in India and claim a refund of the excess.
- Remember: FTC in India (Rule 128) is available to residents; as an NRI, you generally claim the credit in your resident country (e.g., Form 1116 in the US). (Income Tax India)
Quick computations you can use
Treaty credit (in residence country) – simple rule of thumb:
Allowable FTC = min(Foreign tax paid, Tax payable in residence country on same income)
(Residence-country law governs the exact mechanics.)
Checking value of DTAA at source:
If NRO FD interest = ₹1,00,000; default Indian TDS ~30% ⇒ ₹30,000 withheld.
If treaty cap = 15% and payer applies it with TRC + 10F ⇒ TDS = ₹15,000 (cash-flow saving ₹15,000).
Bank forms & common questions NRIs ask
- Can I submit Form 15G/15H to avoid TDS on NRO interest?
No. These are resident-only declarations; NRIs are not eligible. Use DTAA or apply for a lower TDS certificate under Section 197 instead. (ICICI Bank) - Are NRE/FCNR interests exempt?
Yes, if you meet eligibility/tenure norms—NRE interest is exempt under Section 10(4)(ii) and FCNR(B) interest is also exempt while you’re non-resident. (Income Tax India) (SBI)
Documentation checklist (give these to the payer)
- TRC (for the relevant financial year; original or attested copy).
- Form 10F (e-filed acknowledgment copy, and the PDF you submitted). (Income Tax India)
- Self-declaration of beneficial ownership and no-PE (if applicable to services).
- Passport copy (identity/residence evidence) and PAN (if you have one).
Avoid these frequent mistakes
- Submitting late TRC/10F → payer deducts at higher rate; you end up waiting for refunds. (Income Tax India)
- Using NRO for all deposits → interest is fully taxable; park eligible funds in NRE/FCNR to lawfully avoid Indian tax. (Income Tax India) (SBI)
- Relying on FTC in India as an NRI → Rule 128 relief is for residents; your resident country generally gives the credit. (Income Tax India)
Mini case study (US-resident NRI)
- Situation: ₹10,00,000 NRO FD @ 7% → ₹70,000 interest.
- Default TDS (30% approx.) = ₹21,000.
- With DTAA: Provide TRC + 10F; India–USA treaty caps interest withholding to 15% → ₹10,500 TDS. (IRS)
- US filing: Report ₹70,000; claim FTC for ₹10,500 (subject to US rules). Net: no double tax; only the higher of the two systems applies.
FAQs (for voice/featured snippets)
Q1. Is a TRC compulsory to claim DTAA in India?
Yes. Section 90(4) requires a TRC for any non-resident to claim treaty relief.
Q2. What if my TRC doesn’t show all particulars?
File Form 10F to furnish missing details; the rule and notification enable this. (India Code)
Q3. I don’t have a PAN. Can I still file Form 10F?
CBDT allowed manual filing without PAN only till 30 Sept 2023. Thereafter, e-filing applies. Check the portal for procedural updates. (Income Tax India)
Q4. Can an NRI claim Foreign Tax Credit in India?
FTC under Rule 128 applies to a resident in India. NRIs typically take the credit in their country of residence. (Income Tax India)
Q5. Are NRE/FCNR interests always tax-free?
They are exempt in India while you’re non-resident and conditions are met; confirm status each year, especially after returning to India (RNOR/ROR rules). (Income Tax India) (SBI)
Key takeaways for NRIs
- Front-load paperwork (TRC + 10F) so DTAA rates apply at source—that’s the cleanest way to avoid double taxation.
- Use NRE/FCNR accounts where eligible to keep interest exempt in India. (Income Tax India)
- File your Indian ITR when TDS exceeds treaty or when required; claim refunds promptly.
- Take FTC in your resident country; Rule 128 relief in India is for residents. (Income Tax India)
This article is educational and not tax advice. For complex cases (multiple countries, ESOPs/RSUs, property sales), consult a cross-border tax advisor.