How DTAA Helps NRIs Reduce Tax Liability in India

For Non-Resident Indians (NRIs), income earned in India—such as dividend income, interest from bank deposits, rental income, or capital gains—is subject to Indian taxation. At the same time, many NRIs also pay tax on the same income in their country of residence. This creates a burden of double taxation. Understanding the DTAA benefits for NRIs in India is crucial for minimizing this financial strain and avoiding double taxation.

To solve this problem, India has signed Double Taxation Avoidance Agreements (DTAA) with more than 90 countries. DTAA ensures that NRIs do not pay tax twice on the same income, thereby lowering their total tax liability.

What is DTAA?

DTAA is a tax treaty between two countries that determines how a resident of one country will be taxed on income earned in the other. Its primary goal is to avoid double taxation and promote cross-border investments and financial clarity for NRIs.

How DTAA Reduces double taxation for NRIs

1. Reduced TDS Rates on Indian Income

NRIs often face high TDS on income earned in India—30% on interest, 20% on dividends, and 30% on rent paid to an NRI landlord.

With DTAA, they can access concessional tax rates, which are significantly lower.
For example:

• Interest may be taxed at 10% instead of 30%.
• Dividend income may also attract a lower rate under certain treaties.

These reduced rates apply at the time of TDS, immediately lowering tax outflow.

2. Taxation in Only One Country

Some DTAA treaties specify that certain types of income will be taxed only in one country—either India or the NRI’s country of residence.

This means that if the income is taxed in India, it will not be taxed again abroad, and vice versa.
This completely eliminates double taxation.

3. Tax Credit / Tax Relief

If the treaty allows taxation in both countries, NRIs can claim tax credit in their home country.
This means the tax paid in India is deducted from the tax payable abroad.

Example:

• NRI pays ₹10,000 tax in India
• Tax payable in resident country on same income ₹15,000
• They only pay the difference ₹5,000 there

This ensures NRIs never pay more than the higher of the two countries’ tax rates.

4. Clear Rules on Tax Treatment

DTAA brings clarity on how various income types are taxed:

• Salary
• Rent
• Interest
• Dividends
• Capital gains
• Business income

This transparency helps NRIs plan investments, rentals, and deposits in India more efficiently.

5. Avoiding Excess TDS with TRC

To avail DTAA benefits, NRIs must submit a Tax Residency Certificate (TRC) from their country of residence.
This ensures correct TDS rates are applied right from the start, preventing excess deductions.

6. Apply DTAA lower Rates While Filing Income Tax Return in India.

Yes, NRIs can apply DTAA concessional tax rates (such as 10% or 15% on interest income) instead of the default 30% tax rate under Indian law—but only if they are eligible under the DTAA treaty with their country of residence.

Example:

• Default Indian tax rate on NRO interest = 30%
• Many DTAA treaties (e.g., UAE, USA, UK) allow interest to be taxed at 10%
• So the NRI can file their return using the DTAA rate of 10%, not 30%

This reduces the total tax liability and results in a refund if higher TDS was deducted.

Steps NRIs Must Follow to Claim DTAA Benefits in India

1. Obtain a Tax Residency Certificate (TRC)

A Tax Residency Certificate is the most important document for DTAA.
It is issued by the tax authority of the NRI’s resident country.

The TRC should include:

• Name
• Address
• Country of residence
• Tax identification number
• Residential status for the relevant year
• Validity period

Without TRC, DTAA benefit cannot be claimed.

2. Submit Form 10F

If the TRC does not contain all the required details, the NRI must fill and submit Form 10F.

Form 10F includes:

• Nationality
• Tax identification number
• Address
• Confirmation of being a resident of the foreign country

This form is mandatory and must be submitted online through the e-filing portal.

3. Submit DTAA Documents to the Income Payer

   To ensure lower TDS at source, the NRI must give:

• TRC
• Form 10F
• Self-declaration

to the following, depending on income type:

• Bank (for NRO interest)
• Company (for dividend)
• Tenant (for rental income)
• Indian firms (for royalty or services)

If these documents aren’t submitted, the payer will deduct higher TDS by default.

4. Apply DTAA Rate While Filing ITR

Even if higher TDS was deducted, the NRI can apply DTAA rates in their Income Tax Return to:

• Reduce tax liability
• Claim refund of extra TDS

Example: If bank deducts 30% on NRO interest but DTAA rate is 10%, NRI can file using 10% and get refund of 20%.

When Should an NRI Submit Form 10F?

1. Submit Form 10F before or at the time of TDS deduction

If you want the lower DTAA rate to be applied immediately, you must give:

• TRC
• Form 10F
• Self-declaration (if required)

to the income payer (bank, tenant, company, etc.) BEFORE they deduct TDS.
This ensures TDS is deducted at the reduced DTAA rate.

2. Can you submit Form 10F later—in the middle of the year or at year-end?

YES. You can submit Form 10F any time during the financial year, even at the end of the year, but:

• If TDS has already been deducted at a higher rate,
• You can still claim DTAA benefit while filing your ITR,
• And get a refund of the excess TDS deducted.

So DTAA benefit is not lost if Form 10F is submitted late—
you simply get the benefit through refund at the time of filing return instead of upfront.

  3. Do you need Form 10F at the time of filing return?

YES. Form 10F is required in your ITR filing if:

• You are claiming DTAA benefit, and
• Your TRC does not contain all the required details.

So Form 10F is needed at two places:

1. For lower TDS → Submit to payer during the year
2. For claiming DTAA in ITR → File online in e-filing portal with your return