Tax Residency Certificate and DTAA Benefits?

A tax residency certificate is an official document that is issued to the resident taxpayer of a country by the Income Tax Department as proof of residence in the nation in that financial year. This tax certificate covers the following income types given below: 

• Income from the assets in foreign countries.
• Income generated from the foreign country's services
• Getting a salary in a foreign country
• Income earned from the mutual funds and investments in foreign countries 
• Income from selling agricultural products 
• Interest from the savings account in foreign countries. 

What are the documents required to get the TRC application?

To get a Tax residency certificate, here are the following eligibility criteria are given below: 

• You should have a fixed business in a foreign country.
• You should be a resident of a foreign country or have a domicile certificate. 
• A business or an individual needs to be a tax resident of the issuing country. 

Here are the benefits of DTAA: 

• Taxpayers under the DTAA claim the international taxes paid against domestic tax liabilities. This helps the taxpayer to avoid paying double taxes, and it also provides a smooth process, which helps you to avoid the tax paid twice for the same profit. 
• DTAA provides a legal understanding and helps developing countries to make more investments in foreign countries in accordance with international taxation. 
• The DTAA agreement provides a lower withholding tax rate, TDS, which is very beneficial for investors and service providers. For example, loyalties paid for foreign countries to the Indian residents, dividends, and interests.  

DTAA is an agreement that is signed between different countries to avoid paying double tax. India has signed DTAA with more than 100 countries to avoid paying double tax on the same income and profits. A DTAA is of three types, which are Tax credits, Bilateral treaties, and exemption methods. Given below  are the categories that are covered by the DTAA: 

• On the property
• Fixed deposit accounts
• Salary 
• Different types of services
• On capital gains 
• Savings, etc.