Tax residency certificate must for foreign investors

All foreign investors will have to produce tax residency certificates (TRC) of their base nation to claim benefits under the double taxation avoidance treaty from April 1, 2013, says a government notification.

The amendments to the Income Tax Act, 1961, the Central Board of Direct Taxes (CBDT) said, will take effect from April 1, 2013 and will apply in relation to the assessment year 2013-14 and subsequent years. The notification amends Section 90 and Section 90A of the Act dealing with taxation of foreign investment and tax benefits under the Double Taxation Avoidance Agreements (DTAAs). Currently, India has a total of 84 DTAAs with foreign countries.

The TRC for availing tax benefits was proposed in the 2012-13 Budget, presented by the then Finance Minister Pranab Mukherjee.

The TRC to be obtained by an assessee, not being a resident in India, from the Government of the country or the specified territory, shall contain the name of the assessee, status as to whether it is an individual or company, its nationality and country wherein it is registered or incorporated.

Besides, the TRC should also have the tax identification number of the assessee, its residential status for the purposes of tax, period for which the TRC is applicable and address of the assessee during that period.

Under a clause in the DTAA entered into between two countries, the assessee can take the advantage of paying capital gains tax in either of the two nations.