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CA Final · Direct Tax Laws & International Taxation · Application and Interpretation of Tax Treaties

Under the Income-tax Act, when a notification under section 90 gives effect to a treaty, which statement about the Tax Residency Certificate (TRC) is correct for a non-resident claiming treaty benefit in India?

A non-resident claiming treaty benefit in India must furnish a tax residency certificate issued by the government of its country of residence, along with prescribed information. Filing a return does not replace it, and it applies to companies as well, though it does not shield an impermissible avoidance arrangement.

  1. AA TRC is not required if the assessee files a return of income
  2. BThe non-resident must furnish a TRC from the government of its country of residence, along with prescribed information, to claim treaty benefitCorrect
  3. CA TRC is required only for individuals and not for companies
  4. DA TRC alone guarantees the treaty benefit even if the arrangement is an impermissible avoidance arrangement

Explanation

Section 90(4) requires a non-resident claiming treaty relief to furnish a TRC from its country of residence, along with other prescribed particulars. It applies to companies and others, so option C is wrong. A TRC is necessary but not always sufficient, as anti-avoidance rules can still deny benefit, so option D is wrong.

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