Why an Indian Tax Residency Certificate matters
When a UK company makes interest payments to a party in India, the payer may deduct tax at source. An Indian Tax Residency Certificate (TRC) can reduce that withholding tax under the applicable tax treaty. Supplying a valid TRC helps the payer apply the correct, lower rate and avoid unnecessary tax leakage.
What is Form 10FA?
Form 10FA is the online declaration used to confirm Indian tax residency for a specified financial year. Submitting this form is a key step to obtain a TRC that supports reduced withholding on interest payments. The form requires basic residency information and supporting details that prove the applicant was resident in India for the relevant year.
How to apply for a TRC using Form 10FA
- Check eligibility: Ensure you meet the residency test for the relevant financial year.
- Gather documents: Prepare identity and tax-related documents that demonstrate Indian tax residency for the period in question.
- Complete Form 10FA online: Fill in the required fields accurately, confirming the period of residency and the financial year.
- Submit and follow up: After submission, retain acknowledgement details and follow the process until the TRC is issued.
- Provide the TRC to the UK payer: Share the certificate so the payer can apply the reduced withholding tax rate.
Practical tips and common pitfalls
- Be precise about the financial year: The TRC must cover the specific year when the income arises.
- Keep records: Save copies of the submitted form and supporting documents in case the payer requests verification.
- Timing matters: Apply early to avoid delays in processing and unintended higher withholding.
- Check completeness: Incomplete or mismatched information can lead to rejection or extra queries.
Final thought
For Indian residents receiving interest from UK companies, a valid TRC obtained via online Form 10FA helps secure treaty benefits and reduce withholding tax. Follow the steps carefully and keep documentation ready to make the process smooth and efficient.