A business may earn income from multiple countries, and due to domestic laws, this income could be subject to taxation in both locations, even if the business is considered a tax resident in only one. To prevent this, companies can use a TRC certificate and utilize the Double Taxation Avoidance Agreement (DTAA) to avoid paying taxes in multiple countries.

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What do these agreements do? They try to stop you from paying taxes twice on the same money to multiple countries. If you pay tax in the first country, the DTAA lets you reduce the tax you owe in the second country.

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India has signed these agreements with many countries. To prove which country considers you a tax resident a special document called a Tax Residency Certificate (TRC) is needed. The TRC certificate helps show you have a right to use the DTAA. Let’s explore this idea more.

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What is a TRC Certificate?

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A Tax Residency Certificate (TRC) is an official document from a country’s tax office showing where a person or company lives for tax reasons. It proves the person or business pays taxes in that country. This document is essential in most international financial and tax matters.

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TRCs are important because they let people take advantage of agreements between countries called Double Taxation Avoidance Agreements (DTAAs). These agreements stop people from paying taxes on the same money in two places. Got a TRC? Then maybe you don't need to pay as much tax when working with another country or even avoid paying taxes there.

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Besides that, a TRC also helps people follow international tax laws. It's useful for anyone working in different countries. The document proves to other countries that you legally pay taxes where you say you do. 

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How to Obtain a TRC Certificate

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Getting a Tax Residency Certificate (TRC) is easy but paying attention to details is important and specific steps must be followed. Here’s a guide to help you understand how to get a TRC.

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Who is Eligible?

Every resident of India as per the income tax laws is eligible to obtain a TRC. Here are some of the documents you may need to provide the IT department:

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• Proof of Residency
• Tax Payments
• Business Proof

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Steps to Apply

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Step 1: Collect Documents

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Gather all needed documents like proof you live in the country and proof you pay taxes. Check they are up-to-date and official.

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Step 2: Fill Out Application

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Get the application form from the tax office. Write details about where you live and where you get money from in the form.

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Step 3: Submit the Application

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Turn in the filled-out form with all your papers to the tax office. Maybe you will submit it online or by mail. Maybe in person. Check the rules of the office in your country.

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Step 4: Wait for Approval

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After you apply your forms will be checked by the tax office. Did you add wrong details? If not there will probably be no problems in processing.

How Long Does It Take to Receive a TRC Certificate?

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‍The waiting period to get a TRC depends a lot on the country and how fast the local tax office works. Sometimes it could be a few days. Other times it could take weeks.There might be extra waiting time during the busy tax period or if they ask for more details about your business.

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In India, the application for the TRC certificate is filed with the Income Tax Department; consequently, it typically takes about 15 to 20 days to obtain your TRC. Meanwhile, NRIs need to apply in their respective countries to get their country-specific TRC.

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FAQ

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What documents do you need to apply for a TRC in India?

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To get a TRC in India you usually need:

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- A filled-in application form

- Your ID proof (like a passport)

- Address Proof (like a utility bill or rental papers)

- Tax return papers to show your tax residency

- Other documents that the Income Tax Department asks for

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Is there a cost to get a TRC in India?

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Yes there might be a small fee to apply for a TRC in India. The fee changes based on the tax rules. The latest fee can be found on the Income Tax Department website or by talking to a tax expert.

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How long is a TRC certificate valid in India?

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A TRC in India is usually valid for the financial year it gets approved for. 

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Can a company in India get a TRC?

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Yes companies in India are allowed to get a TRC. They need to follow steps similar to personal applications and give proof that shows they are paying taxes and staying in India.

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What if my TRC application doesn’t get approved?

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If your TRC request doesn’t get approved the tax office will tell you why. Then you may be able to fix the problems and apply again. It could be a good idea to ask a tax expert to help with the next try.

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How does a TRC help Indians who earn money from other countries?

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People in India who earn outside the country can use a TRC to get lower tax rates through double taxation agreements (DTAA) that stop double taxation between India and other countries. This helps businesses pay less tax on income they earn abroad.

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