In the Finance Act 2012, an amendment in Section 90 of the Income Tax Act, 1961 has been made which says that a foreign vendor / beneficiary / NRI who wish to avail DTAA rate for the Financial Year 2012-13 will have to mandatorily provide Tax Residency Certificate (TRC) to the deductor. TRC is issued by the Tax / Government authority where the beneficiary / vendor reside. No other document in lieu of TRC shall be considered for availing the DTAA rate for the said financial year. The Act says that TRC should be obtained in a manner containing such particulars as may be prescribed by the Indian Income Tax Authorities, in regard to the residency of the assessee in the respective country outside India.
In the Finance Act, 2013, India has amended Section 90(4) by omitting the requirement that a tax residency certificate must contain certain information in order to be valid for purposes of claiming the benefits of a tax treaty. Instead, new Form 10F may be submitted by a nonresident to an Indian payer when claiming Treaty benefits.
A signed letter on the firms letter head stating that the entity does not have a permanent establishment in India under the relevant Treaty article.
It is mandatorily required to be submitted by every assessee claiming treaty benefits.