DTAA Requirement to File Form 10F
As per rule 21AB of the Income-tax Rules, 1962 read with section 90(5) of the Income-tax Act, Form 10F is required to be filed along with Tax Residency Certificate (TRC) issued by overseas Tax Authorities confirming the Assessee as Tax Resident in other country.
Further, Form 10F is filed to claim the benefit of Double Taxation Avoidance Agreement (DTAA) between two countries in the form of beneficial rate of taxation (which is reduced rate as compared to rates provided under Income-tax Act) or exemption claimed on certain types of income under DTAA.
The TRC serves as evidence that the assessee is a tax resident of the overseas jurisdiction. This implies that the income for which exemption or relief is claimed in India is subject to tax in the foreign country, thereby avoiding double non-taxation. However, this remains a grey area in cases where the foreign jurisdiction (e.g., the United Arab Emirates, Kuwait, etc.) does not levy personal income tax, even though the assessee qualifies as a tax resident and is claiming exemption in India.
When Form 10F is not required to be file
The assessee is not required to file Form 10F where the following particulars of information required in Form 10F is available in the TRC issued by overseas countries:
- Status (individual, company, firm, etc.) of the assessee;
- Nationality (in case of an individual) or country or specified territory of incorporation or registration (in case of others);
- Assessee’s Tax Identification Number in the country or specified territory of residence and in case there is no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which the assessee claims to be a resident;
- Period for which the residential status, as mentioned in the certificate referred to in section 90(4) or section 90A(4), is applicable; and
- Address of the assessee in the country or specified territory outside India, during the period for which the certificate, as mentioned above, is applicable.
Recent Developments in Electronic Filing of Form 10F
As per notification No. 03/2022 dated July 16, 2022 issued by Central Board of Direct Taxes (CBDT), Ministry of Finance, Form 10F is required to be furnished electronically and shall verified in the manner prescribed on the Income-tax portal. Earlier, manual Form 10F is required to be filed.
Further, those Non-Residents (NR) taxpayers who are not having Permanent Account Number (PAN) and does not require to obtain PAN as per relevant provisions of the Income-tax Act read with Income-tax Rules contained in section 139A read with rule 114AAB can also file Form 10F electronically.
Steps to File 10F Electronically on Income Tax Portal
1. Steps to file Form 10F where PAN is available
- Login on e-filing website
- From dashboard, select E-file tab and then select Income Tax Forms
- Select the option “File Income Tax Forms”
- Once the page for this option is displayed, kindly select 3rd tab i.e., “Person not dependent on any source of Income (Source of Income not relevant)” and search Form 10F
- Click on File Now and select Assessment Year for which Form 10F is to be obtained and then click on continue
- Provide the necessary details required in Form 10F
- After providing the details, attach the copy of TRC for the relevant period
- Verify the Form 10F through the methods provided including One Time Password (OTP) sent on Mobile number registered with Aadhaar Number, Electronic Verification Code (EVC) through Net Banking
2. Steps to file Form 10F where PAN is NOT available
- Visit the e-filing website and click on Register located on top right corner of the page
- Select “Non-Residents not having and not required to have PAN” under the drop down in the Category as “Others”
- Fill in the required information, including category of taxpayer, your full name, date of incorporation/birth, tax identification number, and country of residence.
- Provide the details of the key person, including their name, date of birth, tax identification number, and designation and contact details of key person including primary & secondary Mobile Number and Email ID.
- Provide the complete address of the taxpayer
- After providing above details, OTP will be sent to primary mobile number and email ID.
- After OTP verification, attach ID proof, address proof, TRC and other document (if required) and submit the Form.
Consequences of Non-Filing of Form 10F
In case Form 10F is not filed electronically by the assessee, they may not be eligible for claiming benefit under DTAA. Such benefits under DTAA is availed in one of two ways, either by the Deductor (who is making payment to the Non-Resident Assessee) at the time of deduction of withholding tax or by the assessee himself in the income-tax return filed.
In the first scenario where deductor provides the benefits under DTAA, the absence of valid Form 10F along with TRC may lead the deductor to deny the benefits under DTAA and will deduct withholding tax at the applicable rate prevalent under Income-tax Act, even if that rate is higher than what is prescribed under the DTAA.
Further, in case TRC as well as PAN are not available with the Assessee, Deductor may deduct the withholding tax at higher rate prescribed under section 206AA, if the details and documents prescribed under rule 37BC in relation to relaxation from deduction of tax at higher rate under section 206AA are not furnished before Deductor.
In the second scenario where the assessee independently avail the benefits under DTAA in the income-tax return filed, the Income Tax Department may deny the benefits availed under DTAA while processing the income-tax return, if Form 10F is not filed electronically along with TRC.
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Disclaimer: This article serves an educational purpose and should not be considered as professional advice. Consultation with a qualified individual is recommended before making any decisions based on the content provided. The author bears no responsibility for any actions taken based on this article.
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