Want relief from double taxation on foreign income under DTAA? Know how to apply for residency certificate using Form 42

Indian residents earning income abroad may need a Tax Residency Certificate to claim benefits under tax treaties. The Income Tax Department allows eligible taxpayers to apply online under the Income-tax Act, 2025. Here’s how Form 42 works, who can apply and what to know before filing.

Indian residents earning income from overseas may need a Tax Residency Certificate (TRC) to claim tax benefits under a Double Taxation Avoidance Agreement (DTAA).

Under the Income-tax Act, 2025, applicants can apply for the certificate online through the e-filing portal using Form No. 42. Here is what taxpayers need to know about tax residency, DTAA benefits, and the application process.

What is a Tax Residency Certificate (TRC)?

A Tax Residency Certificate establishes a taxpayer’s residential status for tax purposes in India. It can serve as supporting documentation when an Indian resident seeks benefits available under a tax treaty between India and another country.

TRC allows taxpayers to fulfill requirements for tax claims in other countries under the Double Taxation Avoidance Agreements (DTAAs).

What is a Double Taxation Avoidance Agreement?

A DTAA is a tax treaty between two countries that sets out how specified categories of income will be taxed.

Suppose an Indian resident earns interest from a bank deposit in another country. The foreign country may deduct tax on the interest earned, while India may also tax the income because the individual is an Indian tax resident. This can result in double taxation. The taxpayer can claim relief under the applicable DTAA.

India has entered into DTAAs with several countries, and taxpayers may qualify for an exemption, a lower tax rate, or relief from double taxation.