What is a Tax Residency Certificate?

A Tax residency certificate (TRC) is a document that is issued to prove the individual's residence in the following financial year. This document is issued by the Income Tax Department of the taxpayers' country.

In India, an individual who is responsible for paying taxes on the income earned around the world is called a Resident and Ordinarily Resident (RNOR), and non-resident individual taxpayers have to pay the tax on the income that is earned in India.  

What are the Benefits of a TRC? 

There are many benefits of having a tax residency certificate, which are given below:

• Helps taxpayers to get DTAA: The Tax Residency certificate helps the taxpayers to get the benefits of the DTAA. It helps the individual not to get taxed twice on the income earned. 
• It also acts as a Proof of Residence: TRC can also be used as a proof of residence for various financial transactions, for investments, opening a bank account, and international trade. 
• Provides Transparency: TRC helps to provide transparency for the individual and the company's tax residency status. Furthermore, it helps to improve the international smooth financial transactions.   
• Allows Tax Treaty benefits: TRC also helps businesses and individuals to get the advantages of the DTAA treaties, and provides lower tax rates on different income types, like interests, dividends, and royalties. 
• Easy Tax Procedures: TRC helps businesses and individuals to file easy and simplified income tax returns, and it aims to lower the chances of disputes with foreign tax authorities and provide smooth tax treatment.  

Requirements of the Tax Residency Certificate

To get a tax residency certificate, taxpayers need to meet some of the requirements, which are given below: 

• Businesses or individuals must be tax residents of the issuing country. 
• They should have a fixed business in the foreign country. 
• They must have a domicile certificate and resident of the foreign country.