“Synopsis”
Double taxation can be a silent drain on an NRI’s income. If you earn in India and live abroad, you might end up paying tax in both countries. But India has signed Double Taxation Avoidance Agreements (DTAAs) with more than 90 countries, offering NRIs a legal route to relief. The key is understanding the process, meeting documentation requirements, and filing correctly. This guide simplifies how to claim DTAA benefits step-by-step in 2025.
1. What Is DTAA and Why It Matters
DTAA is a bilateral tax treaty that ensures your income isn’t taxed twice. For NRIs, it’s the most powerful tool to reduce tax liability legally. Under Section 90(2) of the Income Tax Act, 1961, you can choose whichever is more beneficial—DTAA or domestic tax law. If there’s no treaty, Section 91 allows unilateral relief.
2. Who Can Claim DTAA Relief?
To claim DTAA benefits, you must:
- Be classified as an NRI under Section 6 of the Income Tax Act
- Be a tax resident of another country (with proof)
- Earn income in India subject to TDS or direct tax
Your residency status is determined based on stay duration using the 182-day or 60-day + 365-day rule.
3. What Kind of Income Is Covered?
DTAA relief applies to:
- Interest income (NRO deposits)
- Dividend payouts from Indian companies
- Capital gains on shares or property
- Rent from Indian real estate
- Royalties and consultancy income
Each treaty specifies the applicable tax rate and who has the right to tax that income. For instance, the India-USA DTAA limits Indian tax on interest income to 15%.
4. Types of DTAA Relief Available
There are two mechanisms:
- Exemption method: Income taxed in one country only
- Tax credit method: Income taxed in both, but credit given for tax paid in source country
Example: If you’re taxed in India and also in the US, you claim credit in your US return for tax already paid in India.
5. Step-by-Step Process to Claim DTAA Relief
Step 1: Get a Tax Residency Certificate (TRC) This certificate proves you’re a tax resident of the country where you live. Mandatory under Rule 21AB.
Step 2: File Form 10F Online If your TRC doesn’t include key details, Form 10F fills the gap. As per CBDT guidelines, it must be filed electronically from 2023.
Step 3: Submit a Self-Declaration to Income Payer A simple letter stating your DTAA claim should accompany your TRC and Form 10F.
Step 4: Ensure You Have a PAN Card Without a PAN, TDS may be deducted at higher rates under Section 206AA.
Step 5: File Your Indian Income Tax Return Use ITR-2 or ITR-3 and claim DTAA relief under Section 90 or 91. Attach TRC, Form 10F, and foreign tax details if applicable.
6. Mistakes NRIs Should Avoid
- Submitting outdated or incomplete TRC
- Missing Form 10F or filing it offline
- Holding income in non-NRO accounts
- Not filing your ITR by the deadline
- Ignoring tax paid abroad in credit claim
Neglecting documentation could mean loss of DTAA benefits or penalty under Indian tax law.
7. Legal Framework That Supports DTAA Relief
Here’s the law backing your claim:
- Income Tax Act, 1961
- Section 6 (NRI definition)
- Section 90 (DTAA relief with treaties)
- Section 91 (Unilateral relief)
- Section 206AA (PAN mandatory for lower TDS)
- Rule 21AB of Income Tax Rules – TRC requirement
- CBDT Circulars & Notifications – Mandatory e-filing for Form 10F
- Treaty Articles – Country-specific provisions like Article 11 (interest), Article 13 (capital gains)
Always keep a copy of the relevant treaty handy when filing.
Conclusion
DTAA relief isn’t automatic—you have to earn it with documents, filings, and legal awareness. In 2025, NRIs who understand the Income Tax Act and take the time to follow procedure are the ones saving the most. So gather your TRC, fill Form 10F, file smart, and let the law do the rest.
