Whether a person is a tax resident or not of a particular country is to be declared by customer in consultation with her/his own chartered accountant/personal tax advisor. The customer himself/herself will have to confirm her/his tax residential status (i.e., whether he/she is a tax non-resident or not) by responding to certain questions which are included in the payout form itself basis which the TDS will be applied.

 

It may be noted that the determination of tax residency is crucial in order to be eligible to claim benefits of the applicable DTAA.`

 

What is Tax Residency Certificate (TRC)?

TRC is a certificate issued by the Government of a country stating that the said person is a tax resident. Usually TRC is issued by tax/revenue/reserve departments of a country and is valid only for a certain period. Therefore, policyholders must avail policy benefits while the certificate is still valid – to enjoy DTAA benefit.

 

Is there a specified format of the TRC (Tax Residency Certificate)?

Section 90(4) of the Income Tax Act requires that TRC is to be obtained by a non-resident from the government of the country of which he is a tax resident. Accordingly, there is no specific format prescribed under the Income Tax Act for TRC. TRC should atleast contains the following information, which is not an exhaustive list, and would depend on the TRC issuing authority:

 

1. Name and address of the assessee.

2. Tax residency status;

3. Period for which the TRC is valid;

4. Nationality of the assessee;

5. Tax identification number of the assessee etc.

 

It is important to note that the TRC should cover the period during which the pay-out is being made.