Treaty relief in India is not a rate problem, it is a sequencing problem: the Indian payer needs your TRC and Form 41 before the payment is made, because after it the money has already gone to the government.
Last verified: 5 September 2026 · Applies to: Tax Year 2026-27 (Income-tax Act, 2025)
Contents
- Why treaty relief is really a paperwork deadline
- Where DTAA relief sits now: section 159
- The TRC is mandatory under s.159(8)
- Form 10F is now Form 41, under Rule 75
- Electronic filing has been compulsory since 1 October 2023
- No PAN? There is a portal category for exactly that
- The workflow, in the order it has to happen
- Illustrative example: the payment that went out first
- Frequently asked questions
- How BVACA can help
Why treaty relief is really a paperwork deadline {#why-treaty-relief-is-a-deadline}
A non-resident receiving a payment from India has a defensible expectation: their country has a Double Taxation Avoidance Agreement with India, and the treaty limits what India may withhold. That expectation is usually correct in substance and usually defeated in practice, for one reason.
The Indian payer is the person who decides the deduction, and the payer carries the liability for getting it wrong. Faced with a payment due on Friday and no TRC in the file, an Indian finance team will deduct at the domestic rate every time. That is the rational choice for them. It is an expensive one for you, because recovering the difference means obtaining a PAN, filing an Indian return, and waiting for a refund, which for a one-off consulting fee or a single royalty payment can cost more in time and professional fees than the tax at stake.
So the practical rule is short: the paperwork must exist before the payment, not after it.
Where DTAA relief sits now: section 159 {#where-dtaa-relief-sits}
The Income-tax Act, 2025 renumbered the whole statute on 1 April 2026. Treaty relief moved:
| Concept | Old (1961 Act) | New (2025 Act) |
|---|---|---|
| DTAA relief, agreements with foreign countries | ss.90 and 90A | s.159 |
| TRC requirement | within ss.90 / 90A | s.159(8) |
| Information from a non-resident claiming treaty relief | Form 10F, Rule 21AB | Form 41, Rule 75 |
| TDS on payments to non-residents | s.195 | s.393(2), Table Sl. No. 17 |
| Payer's application to determine the taxable proportion | s.195(2) / 195(3) | s.395(2) |
| Information on a foreign remittance | s.195(6) | s.397(3)(d) |
If you are working from a template engagement letter, a supplier onboarding pack or an internal SOP written before 2026, it almost certainly says "Section 90" and "Form 10F". Both are now legacy references. The wider list is in the full old-to-new income tax form numbering reference.
The TRC is mandatory under s.159(8) {#the-trc-is-mandatory}
A Tax Residency Certificate is not optional. Section 159(8) requires it, with prescribed information, from a non-resident claiming relief under a treaty. No TRC, no treaty rate. This is not a matter of the payer being difficult.
The TRC is issued by the tax authority of your country of residence, not by India. That is the step people underestimate, because turnaround varies widely by jurisdiction and by time of year, and it is entirely outside your Indian adviser's control. A TRC request placed with a foreign revenue authority in the week the invoice is raised will usually be too late.
Two consequences follow. First, if you receive payments from India regularly, treat the TRC as an annual calendar item rather than a transaction item. Second, if a payment is coming and the TRC is not yet in hand, it is often better to delay the payment date than to accept a domestic-rate deduction and chase a refund.
Form 10F is now Form 41, under Rule 75 {#form-10f-is-now-form-41}
The TRC alone is not enough. India also requires the non-resident to furnish prescribed information, historically on Form 10F.
Since 1 April 2026 that is Form 41, prescribed by Rule 75 of the Income-tax Rules, 2026, which replaced the old Rule 21AB. The substance carries over; the citation does not. If a client, a bank or a payer asks you for "Form 10F", they are asking for Form 41.
Electronic filing has been compulsory since 1 October 2023 {#electronic-filing}
This is the point that still trips up non-residents three years on, because a great deal of online material describes the old position.
Form 10F, and now Form 41, must be filed electronically on the income tax portal. There was a temporary reprieve allowing non-residents to furnish it manually. That reprieve expired on 30 September 2023. From 1 October 2023 all non-residents must e-file.
A signed PDF emailed to your Indian payer is not compliance. What the payer needs in their file is the portal-generated form, and a well-run Indian finance team will now ask for exactly that.
No PAN? There is a portal category for exactly that {#no-pan}
The obvious objection to compulsory e-filing is that the income tax portal is built around PAN, and a non-resident receiving a single payment from India may have no PAN and no reason to obtain one.
The portal has a registration category for this: "Non-residents not holding and not required to have a PAN." Registering under it issues a User ID in lieu of PAN, and verification is by digital signature certificate (DSC) or OTP, rather than the PAN-linked electronic verification code that a resident would use.
Two practical notes on that route.
The DSC option needs planning. Obtaining an Indian DSC from abroad involves identity documentation and, in some cases, attestation, so build in time. Where OTP verification is available it is usually the faster path, but it depends on the contact details registered.
Separately, the absence of a PAN can itself affect the rate. In the property context, a seller without a PAN faces deduction at 20% under the higher-rate rule. Under the Income-tax Act, 2025 that rule sits at section 394 (the successor to section 206AA of the 1961 Act): where the payee does not furnish a valid PAN, tax is deducted at the higher of the rate in force, the rate specified in the Act, or 20%.
The relief for treaty cases is settled: a non-resident who furnishes Form 41 with a valid TRC and (where applicable) registers on the portal under the no-PAN category obtains the treaty rate rather than the 20% s.394 fallback. That is the position adopted by the Delhi High Court in the Danisco / Dow Chemical line of authority and now reflected in the redesigned Form 41 workflow, which captures the TRC directly in the form. In other words: TRC + Form 41 (properly filed) is the mechanism that keeps the higher-rate fallback out of a legitimate treaty case.
The workflow, in the order it has to happen {#the-workflow}
This is the sequence a well-run cross-border payment follows. The order is not negotiable, because each step is an input to the next.
| # | Step | Who does it | When |
|---|---|---|---|
| 1 | Obtain the TRC from the home-country tax authority | Non-resident payee | Weeks before the payment. The long pole. |
| 2 | Register on the Indian portal, if no PAN, under "Non-residents not holding and not required to have a PAN" | Non-resident payee | Before step 3 |
| 3 | E-file Form 41 (old Form 10F) under Rule 75 | Non-resident payee | Before the payment |
| 4 | Determine the withholding position under s.393(2) Table Sl. No. 17 read with the treaty and s.159 | Indian payer, usually with a CA | Before the payment |
| 5 | Where the remittance is taxable and above ₹5 lakh, obtain Form 146 (old 15CB) | Chartered Accountant | Before step 6 |
| 6 | File Form 145 (old 15CA), Part C, quoting the Form 146 acknowledgement | Indian payer as remitter | Before the money moves |
| 7 | Deduct, deposit and report | Indian payer | Per the TDS calendar |
Steps 5 and 6 are where the TRC and Form 41 physically land in the file: the payee's TRC is now captured in the remittance forms, alongside the CA's UDIN. That is why a missing TRC does not merely cost you the treaty rate, it can stall the remittance certification altogether. The mechanics of those two forms are in our note on how Forms 145 and 146 replaced 15CA and 15CB.
Where the payer wants certainty rather than judgement, there is a further route: the payer may apply under s.395(2) (old s.195(2) and (3)) to have the taxable proportion of the payment determined by the Assessing Officer.
Illustrative example: the payment that went out first {#illustrative-example}
Illustrative example. An Indian company engages a consultant who is tax resident abroad, for a fee of ₹40,00,000. The engagement is signed in November, the invoice is raised in December, and the TRC is requested from the home revenue authority in the same week.
The TRC arrives in February. The payment went out in December.
What happened in December is that the Indian payer, with no TRC and no Form 41 in the file, deducted under s.393(2) Table Sl. No. 17 at rates in force under domestic law. The consultant's position is now this:
| If the TRC and Form 41 had been in place | What actually happened | |
|---|---|---|
| Rate applied at payment | Treaty rate under s.159 | Domestic rate under s.393(2) Table Sl. No. 17 |
| Action needed afterwards | None | Obtain a PAN, file an Indian return, claim the refund |
| Time to recover the difference | Not applicable | Return due date, then processing |
| Professional cost | The TRC and Form 41 | A PAN application, a return, and follow-up |
The differential itself is not stated here, because it depends on the treaty and the income stream. The point of the example is that the differential is irrelevant to the decision: the recovery cost and delay are the same whether the gap is two percentage points or twenty.
Figures are illustrative.
Frequently asked questions {#frequently-asked-questions}
Is Form 10F still valid, or is it Form 41 now?
For anything after 1 April 2026 it is Form 41, prescribed by Rule 75 of the Income-tax Rules, 2026, which replaced the old Rule 21AB. Form 10F is the legacy reference. If a payer or bank asks for Form 10F, supply Form 41; the information required is substantially the same.
Can I still file Form 10F or Form 41 manually?
No. Electronic filing on the income tax portal has been compulsory for non-residents since 1 October 2023; the manual-filing reprieve expired on 30 September 2023. A signed PDF sent by email to your Indian payer is not compliance, and a careful payer will not accept it.
How do I e-file Form 41 if I do not have a PAN?
Register on the income tax portal under the category "Non-residents not holding and not required to have a PAN". It issues a User ID in place of a PAN, and verification is by digital signature certificate or OTP rather than the PAN-linked electronic verification code used by residents.
Do I need a TRC as well as Form 41?
Yes. The TRC is mandatory under s.159(8), with prescribed information, and it is issued by the tax authority of your country of residence. Form 41 is the separate Indian-prescribed information return. Treaty relief needs both, and both need to be in the payer's file before the payment.
The payer has already deducted at the full rate. What now?
The route is to claim the excess through an Indian return, which in practice means obtaining a PAN, filing, and waiting for the refund. It works, but it is slower and more expensive than getting the TRC and Form 41 in place beforehand, which is why the sequence matters more than the rate.
How BVACA can help {#how-bvaca-can-help}
Bachhal Vijender & Associates works on the India side of these payments for both sides of the transaction: advising an Indian payer on the correct withholding position under s.393(2) read with s.159, and helping a non-resident payee register on the portal, e-file Form 41 and assemble the TRC pack so the payer can act on it. Where a remittance certificate is needed we issue Form 146 and prepare Form 145 in the right order.
We do not file returns in the payee's home country and we do not act as a foreign tax adviser. Where you already have an accountant or attorney in the US, UK, Canada, the UAE or Australia, we are the India-side partner and work to their file. Timing is the part we can genuinely improve: most of this is calendar management, and it is done by email and scheduled calls without anyone travelling.
If a payment from India is scheduled and the TRC is not yet in hand, that is worth a conversation this week rather than after the deduction. See our cross-border tax consultancy work. If the payment in question is proceeds from a property, the position is different again and is covered in TDS on the sale of property by an NRI; if you are unsure whether you are non-resident at all this year, start with the section 6 residential status tests.
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Author box: CA Vijender Singh Bachhal, Managing Partner, Bachhal Vijender & Associates (FRN 028355N), Panchkula. About the firm
Disclaimer: This article is general information current as at 5 September 2026, not advice for a specific situation. Tax and corporate law in India changed materially on 1 April 2026; verify the position before acting. Illustrative examples are not client matters.
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