henceforth. Banks would be insisting on submission of TRC by the customers every year for claiming the benefit under DTAA. Even though the relative notification has been issued by CBDT in September,2012 clarity is yet to evolve on who would be the competent authority in the foreign state for issuing the tax residency certificate.
When the country is trying hard to plug the current account deficit can we not avoid such costly mistakes?
Agreement (DTAA) shall not be entitled to claim such benefit any more, unless he produces a Tax Residency Certificate ( TRC ) in proof of his residence in any country outside India obtained from the government of that country. CBDT has not prescribed any specific format for the certificate. However CBDT has prescribed following contents to be captured in the Tax Residency Certificate (TRC) on the basis of which DTAA can be extended Viz Name of the assessee, Status (individual, company, firm etc.) of the assessee, Nationality (in case of individual), 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 or in case 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, Residential status for the purposes of tax, Period for which the certificate is applicable and Address of the applicant for the period for which the certificate is applicable. The TRC has to be duly verified by the Government of the country of which the NRO customer claims to be a resident for the purposes of tax. Thus, for a depositor who is a resident of UK , the TRC has to be issued by the UK government. If a customer fails to submit required TRC, he will not be able to claim benefit of DTAA
And as I am just concluding my article I find the Union Budget 2013 presented by the Honourable Union Finance Minister before the parliament today ( 28th February,2013 ) has added insult to injury as far as tax residency certificate is concerned. The Union Budget 2013 proposes to insert a new sub section ( sub section 5 ) to clause 90 and 90 A of the Income Tax Act stating that tax residency certificate shall be necessary but not a sufficient condition for claiming any relief under DTAA. The amendment has not specified any documents which would be considered as sufficient proof for proving the residential status of the depositor. Thus it results in merely giving more power to the assessing officer to be more subjective in his judgement. Such subjectivities would create fears, confusion and lack of confidence in the minds of the depositors. Instead of clarifying the ambiguities , the proposed amendment creates more ambiguities and uncertainties . The above amendment, if passed by the parliament could open a plethora of litigations between the non residents and the income tax department. This could affect the investment decisions of non residents and also inflow of NRO deposits. When the country is trying hard to plug the current account deficit , can we not avoid such costly mistakes? Representation will have to be made by appropriate forums for the same with all earnestness. If the proposed amendment gets passed by the parliament , to my mind it appears that it is equivalent to withdrawing DTAA benefits. I would say what the law gives by one hand , the law takes back by the other hand.
March 2013 UNIQUE TIMES 21