How to obtain tax residency proof in India?

I had given a loan to a UK company while I was living outside India. Now that I have moved back to India this year, the British company is asking for my Indian Tax Residency Certificate (TRC) if I want to claim treaty benefits for a lower withholding tax on the interest payment. How can I obtain this TRC in India?

—Name withheld on request

If you have stayed in India for more than 182 days during the current financial year, you will be regarded as a tax resident under the Indian Income Tax Act, 1961. This position holds even if, upon further analysis, you are later classified as “not ordinarily resident.” As a tax resident, you become eligible to apply for a Tax Residency Certificate (TRC) for the relevant financial year.

To obtain the TRC, an online application in Form 10FA must be submitted through your login on the income-tax e-filing portal. The form seeks a number of details, including your identity and address particulars, the basis on which you are claiming tax residency in India, the specific financial year for which the TRC is required, and the intended purpose for requesting the certificate. Once the form is submitted, the assessing officer will review the information provided along with the supporting documents you upload. After the officer is satisfied with the completeness and accuracy of the details, the department will issue the TRC in Form 10FB. This certificate formally confirms your Indian tax residency for the specified period and can thereafter be shared with the UK company to facilitate withholding tax at the reduced treaty rate of 15%, instead of the standard 20% under UK domestic law.

Additionally, it is relevant to note that Indian foreign exchange regulations permit you to retain the interest income outside India, and there is no requirement to repatriate such funds back to India.

I am a 70-year-old senior citizen who has been residing in the UAE for the past 30 years. I hold Non-Resident External Fixed Deposits (NRE FDs) with many banks in India. I came to know of an ex-parte income tax order against me because the officer has considered one FD amount multiple times and treated it as ‘unexplained investment’ in my name. When I contacted the officer, she mentioned that I had not replied to any of their previous communications and, hence, the order was passed against me. What steps can I now take to resolve this issue?

—Name withheld on request

For the lack of finer details in your case, I presume that the order in question is a final assessment or reassessment order. If this understanding is correct, you may file an appeal before the Joint Commissioner/Commissioner of Income Tax (Appeals) [CIT(A)] within 30 days of receiving the final order. At the time of filing the appeal, you may also submit additional evidence for admission by these officials , including documentary proof supporting your position.

During the appellate proceedings, you will have the opportunity to present your explanations, particularly with respect to the legitimate source of the funds used to make the NRE fixed deposits that have been treated as unexplained investments. Depending on the facts presented and the supporting documentation, the Joint Commissioner/Commissioner may either decide the issue directly or may remand the matter to the Assessing Officer for further examination. In either scenario, based on the circumstances you have described, you appear to have a reasonably strong case.

Harshal Bhuta is partner at P. R. Bhuta & Co. CAs