Karnataka State Chartered Accountants Association (KSCAA) has submitted a representation to the Chairman of the Central Board of Direct Taxes, Bengaluru, dated 22nd June 2024, focusing on simplifying the Tax Residency Certificate (TRC) application process for Indian companies under the Income Tax Act, 1961. They highlight that while TRCs are essential for claiming Double Taxation Avoidance Agreement (DTAA) benefits, the current application procedure is cumbersome and time-consuming. This poses challenges, particularly for Indian companies with income from multiple countries, leading to significant delays in obtaining necessary certificates.
The association argues that since Indian companies are inherently considered residents of India under the Companies Act, 2013, requiring them to obtain TRCs seems redundant. They propose a streamlined approach where Indian companies can automatically be granted TRCs without formal application, possibly allowing for annual download of TRCs from the Income Tax portal. This suggestion aims to ease compliance burdens and ensure timely access to treaty benefits, thus supporting taxpayer compliance and contributing to national development efforts.
KSCAA emphasizes the need for a balanced approach that respects legal requirements while enhancing administrative efficiency. They appeal to the Chairman’s commitment to fairness and justice in tax administration, urging intervention to reform the TRC issuance process. Their representation underscores the broader benefits of a simplified and transparent system, fostering taxpayer confidence and reinforcing the government’s commitment to protecting taxpayer rights.
KARNATAKA STATE
CHARTERED ACCOUNTANTS ASSOCIATION (R)
To,
Shri. Nitin Gupta,
Chairman,
Central Board of Direct Taxes,
Bengaluru
Date: 22nd June 2024
SUBJECT: REPRESENTATION REGARDING RECONSIDERATION OF TAX RESIDENCY CERTIFICATE APPLICATION FOR COMPANIES REGISTERED UNDER THE COMPANIES ACT, 2013
The Karnataka State Chartered Accountants Association (R) (in short `KSCAA’) is an association of Chartered Accountants, registered under the Karnataka Societies Registration Act, in the year 1957. KSCAA is primarily formed for the welfare of Chartered Accountants and represents before various regulatory authorities to resolve the professional problems faced by Chartered Accountants, taxpayers and the business community.
In the past, we have written to your good selves many times populating various issues, challenges and hardships and suggesting possible solutions on the same. Herein, we are presenting before your good selves for your kind consideration, an issue regarding Tax Residency Certificate (‘TRC’) application for claiming the benefit under the Double Taxation Avoidance Agreements (DTAA) as per the Income Tax Act, 1961 (‘1.T Act’).
PROVISIONS APPLICABLE:
Under Sections 90 and 90A, a taxpayer can claim relief under the ‘DTAA’ signed between two or more countries. One of the requirements to claim these benefits is to obtain a Tax Residency Certificate from the Country of Residence. Assessees can apply for a Tax Residency Certificate with the Income Tax Department by submitting application in Form 10FA along with supporting documents.
CHALLENGES FACED:
The application process for a TRC can be complex and time-consuming, often requiring extensive documentation and proof of residency. This can be especially challenging for Indian companies having income from multiple countries.
Due to the complex nature of the application process and the volume of applications received, there can be significant delays in processing TRC applications. This can be frustrating for taxpayers who need the certificate immediately for claiming tax treaty benefits. This tedious process has caused difficulties for taxpayers who wish to comply with the laws of the land and contribute to nation-building.
Moreover, since a company registered under the Companies Act, 2013 (or earlier laws) is considered to be a Resident of India by nature, the requirement to obtain a Tax residency Certificate seems redundant.
REPRESENTATION:
While we recognize the necessity of obtaining TRC to claim treaty benefits under DTAA, this process is time-consuming and can create hurdles for claiming tax treaty benefits. A more balanced and practical approach that respects the due process of law is warranted.
In light of these concerns, we earnestly request your intervention and guidance to address this issue. We suggest that since an Indian company incorporated and registered under the Companies Act, 2013 or any previous company law previously in force, is considered a resident of India, the Company be granted the TRC without a formal application. Further, another feature could be introduced wherein the TRC certificate may be downloaded by the Indian Company from the Income tax portal year-on-year.
We trust in your commitment to upholding the principles of fairness, justice, and efficient tax administration. Your intervention in this matter would not only alleviate the financial difficulties faced by taxpayers but also reinforce confidence in the tax system and the government’s commitment to protecting the rights of taxpayers.
These suggestions aim to improve the TRC process while upholding ethical and legal standards. By prioritizing user-friendliness, transparency, and innovation, we can create a system that is less tedious and more efficient for Indian companies.
Taking into consideration the hardships caused, we the members of Karnataka State Chartered Accountants Association, on behalf of the entire Chartered Accountants community and also on behalf of the trade and industry in the state of Karnataka appeal to your good selves to kindly consider our above request and make the process of issuing TRC simple.
Yours sincerely,
For Karnataka State Chartered Accountants Association
CA. Sujatha G
President
CA. Sunil Bhandary
Secretary
CA. Babitha Babitha G
Chairperson, Representation Committee
Cc to:
1. Nirmala Sitharaman, Hon. Union Minister of Finance and Corporate Affairs, Government of India
2. Pankaj Choudhary, FIon’ble Minister of State, Finance, Government of India
3. Sanjay Malhotra, Hon’ ble Revenue Secretary, Department of Revenue, Ministry of Finance, Government of India
4. Shelly Jindal, PCCIT, Karnataka and Goa
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