Providing relief to foreign investors, the finance ministry has said non-resident taxpayers can give tax residency certificates (TRCs) to claim treaty benefits in any format, instead of a prescribed format sought earlier, along with a prescribed self-declaration form.
In a notification issued on August 1, the Central Board of Direct Taxes (CBDT) has given foreign investors the flexibility to make self-declaration of the information sought by Indian authorities if it is not part of a certificate issued by their resident country. According to the notification, the status of a foreign investor — whether individual or incorporated — nationality, and duration of tax residence could be declared by the investor himself in Form No 10F. The earlier rules required the government of a particular country to give details of residency in a prescribed format, which was difficult as every country has its own format.
Investors raised concerns that it would be troublesome for them to get the TRC seeking too many details from their resident country. As India cannot dictate other countries to give TRC in a particular format, some countries wrote to the government seeking clarification.
“Barring a few particulars such as name and residency status, all other information which we wanted in TRC can be substantiated by the taxpayer himself,” said an official.
TRC was made mandatory in Budget 2012-13 for those availing tax benefits under the double taxation avoidance agreements (DTAAs). In Budget 2013-14, the government brought the provision under the law, but after concerns were raised by investors it clarified that a prescribed format would not be required for TRC.
The government had said earlier that TRC would be a necessary but not sufficient condition for availing treaty benefits. However, in Finance Bill 2013-14, it said that submission of TRC would be a sufficient proof to claim benefits. It clarified TRC produced by a resident of a contracting state would not be questioned by the income tax authorities in India.
The form seeks details such as name of the assessee, status (individual or company), nationality/country of registration, tax identification number, residential status, period for which the certificate is applicable, and address of the applicant.