How To Claim DTAA Benefits While Filing ITR For NRIs?

Navigating the complexities of international taxation can be challenging for Non-Resident Indians (NRIs), especially when it comes to managing income earned in multiple countries. Fortunately, the Double Taxation Avoidance Agreement (DTAA) between India and various countries, including the United States, provides relief from being taxed twice on the same income.

Suppose you are an NRI residing in the US and have earned interest income from Indian bank deposits. Without claiming DTAA benefits, you might be subjected to a high tax rate of 30% on this interest income. However, under the India-US DTAA, you can claim a reduced tax rate of 15%. 

This significant difference can lead to substantial tax savings and demonstrates the importance of understanding and utilizing the benefits provided by the DTAA.

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Understanding the Double Taxation Avoidance Agreement (DTAA)

The DTAA is a tax treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income. It aims to promote economic exchange and provide clarity on tax liabilities. Under the DTAA, NRIs can either be exempted from tax in one of the countries or can claim a credit for the tax paid in one country against the tax liability in another.

Canadian NRIs should also understand the detailed reporting requirements for their income under DTAA, which you can find in our blog here.

Suggested Read - Section 195: Tax Deducted At Source (TDS) For NRIs

Importance of DTAA for NRIs

NRIs often earn income from multiple sources, such as bank deposits, dividends, and investments in India. Without DTAA, they would be subjected to tax both in India and their country of residence, leading to double taxation. DTAA ensures that income is taxed only once, providing significant relief and encouraging cross-border investments.

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Steps to Claim DTAA Benefits in India

NRIs must follow these steps:

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Obtain a Tax Residency Certificate (TRC)

A TRC is essential to claim DTAA benefits. It is issued by the tax authorities of the country where the NRI resides. For instance, if you are an NRI residing in the US, you must obtain a TRC from the Internal Revenue Service (IRS).

The TRC should include the following details:

• Name of the taxpayer.
• Status (individual, company, etc.).
• Nationality.
• Country or specified territory of residence.
• Tax identification number of the taxpayer.
• Period for which the certificate is applicable.
• Address of the applicant.

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File Form 10F Electronically

Along with the TRC, NRIs need to file Form 10F electronically on the Indian income tax e-filing portal. This form provides additional details required by the Indian tax authorities.

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Proper Documentation

Proper documentation is crucial for successfully claiming DTAA benefits. This includes obtaining a TRC and filing Form 10F. These documents must be submitted before filing your tax return to the Indian tax authorities. If you fail to provide the necessary documents, your claim for DTAA benefits may be denied, resulting in higher tax liabilities.

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Conclusion

Claiming DTAA benefits can significantly reduce the tax burden on NRIs and help avoid the complexities of double taxation. By obtaining a TRC, filing Form 10F, and properly documenting all necessary details, NRIs can ensure they take full advantage of the tax relief provided under the DTAA.

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Author - Mr. Abhishek Batra 

CPA, CA - India, US and Canada Taxes

20+ years of experience in NRI Taxation

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To connect with Abhishek Batra, you can reach out to him on iNRI's Tax Service Platform