DTAA COMPLIANCE: FORM 10F AND KYC FOR FOREIGN PORTFOLIO INVESTORS

1. WHAT IS DTAA?

A Double Taxation Avoidance Agreement (DTAA) is a bilateral tax treaty entered into between India and another country to ensure that the same income is not taxed twice - once in India (the source country) and again in the country where the taxpayer is a resident. India has entered into DTAAs with more than 90 countries to promote cross-border trade, investment, and economic cooperation.

DTAAs lay down clear rules regarding:

• Allocation of taxing rights between India and the country of residence

• Applicable tax rates on specific categories of income

• Mechanism for relief from double taxation (exemption or tax credit)

• Certainty and stability in international tax treatment

For non-residents, including Foreign Portfolio Investors (FPIs), DTAA provisions play a central role in determining how income earned from India is taxed.

2. HOW DTAA WORKS UNDER INDIAN TAX LAW

Section 90 of the Income-tax Act, 1961 empowers the Government of India to enter into DTAAs. Under Section 90(2), a non-resident taxpayer is entitled to apply the provisions of the Income-tax Act or the applicable DTAA, whichever is more beneficial.

DTAAs typically cover income such as:

• Dividends from Indian companies

• Interest on bonds, debentures, and government securities

• Capital gains from transfer of securities

• Royalties and fees for technical or consultancy services

• Business profits

While DTAAs provide the legal entitlement to reduced or nil taxation, these benefits are not automatic. The taxpayer must satisfy prescribed documentation and procedural requirements under Indian law to actually avail treaty relief.

3. DOCUMENTATION REQUIRED TO CLAIM DTAA BENEFITS

To claim DTAA benefits in India, a non-resident taxpayer is required to furnish:

• A valid Tax Residency Certificate (TRC) issued by the tax authorities of the country of residence

• Form 10F, where the TRC does not contain all information required under Indian tax rules

These requirements ensure that treaty benefits are granted only to eligible residents of treaty countries.

4. WHAT IS FORM 10F?

Form 10F is a self-declaration form prescribed under Rule 21AB of the Income-tax Rules, 1962. It is required when the Tax Residency Certificate does not contain all particulars mandated under Indian tax law.

Legal Basis and Purpose

• Prescribed under the Income-tax Act and Rules

• Supplements the TRC with missing information

• Enables Indian tax authorities to apply DTAA provisions correctly

• Prevents excess withholding of tax at domestic rates

Form 10F supports DTAA claims for income such as dividends, interest, royalties, fees for technical services, and consultancy income. It helps avoid unnecessary higher taxation by validating residency, tax identification, and treaty eligibility.

5. WHO IS REQUIRED TO SUBMIT FORM 10F?

Form 10F must be filed by non-resident taxpayers, including FPIs, if they:

• Earn income from India

• Seek to claim benefits under an applicable DTAA

• Hold a TRC that does not contain all details prescribed under Indian tax law

Although Form 10F may technically not be required if the TRC already contains complete information, in practice most foreign TRCs do not. As a result, filing Form 10F has become necessary in the majority of cases.

6. INFORMATION REQUIRED IN FORM 10F

7. ONLINE FILING OF FORM 10F

Form 10F is required to be filed electronically on the e-filing portal. Non-residents can register even

without a PAN.

Step-by-Step Process

• Register on the e-filing portal (PAN-based or non-PAN registration)

• Navigate to e-File → Income Tax Forms

• Select Form 10F

• Enter the required details

• Attach the Tax Residency Certificate

• Submit and verify electronically using DSC or other permitted modes

An acknowledgment is generated upon submission and should be retained for records

8. PAN REQUIREMENT FOR FORM 10F

• PAN was earlier mandatory for non-residents

• Currently, Form 10F can be filed without PAN

• However, having a PAN simplifies:

o TDS reconciliation in Form 26AS

o Refund claims

o Future income-tax compliance

9. CONSEQUENCES OF NON-FILING OF FORM 10F

Failure to file Form 10F while claiming DTAA benefits may result in:

• Denial of treaty benefits

• Deduction of tax at higher domestic rates

• Classification as an assessee in default

• Increased compliance and assessment issues

Note: Where income payments or remittances are made to non-residents, additional withholding tax compliances such as Forms 15CA and 15CB may also be applicable. For a detailed understanding of these requirements, refer to our blog on Form 15CA & 15CB for Foreign

Remittance TDS Compliance

10. KYC REQUIREMENTS FOR FOREIGN PORTFOLIO INVESTORS (FPIs)

Apart from tax compliance, FPIs must comply with SEBI-mandated KYC requirements to participate in Indian capital markets.

Purpose of KYC

• Identity verification

• Prevention of money laundering

• Regulatory transparency and investor protection

Documents Commonly Required

• Certificate of Incorporation / constitutive documents

• Proof of address

• PAN or equivalent foreign tax identification

• List of authorised signatories

• Ultimate Beneficial Owner (UBO) details

• FATCA / CRS declarations

KYC is submitted through SEBI-registered KYC Registration Agencies (KRAs) via custodians or intermediaries.

11. HOW DTAA, FORM 10F AND KYC WORK TOGETHER FOR FPIs

• DTAA determines the tax treatment and concessional rates applicable to income earned from India

• Form 10F enables the practical application of DTAA benefits at the withholding stage

• KYC ensures regulatory eligibility to invest and operate in Indian securities        

• Non-compliance may disrupt FPI operations.

• Reduced withholding tax under DTAA provisions

• Compliance with Indian tax and regulatory laws

• Easier reconciliation of TDS credits

• Smooth refund and assessment processes

13. KEY TAKEAWAYS

CONCLUSION

DTAA governs the taxation of income earned by non-residents from India by preventing double taxation and allowing treaty-based tax relief. For Foreign Portfolio Investors, availing DTAA benefits requires strict procedural compliance, including furnishing a valid Tax Residency Certificate, filing Form 10F, and completing SEBI-mandated KYC requirements. Timely and accurate compliance with these obligations ensures correct tax withholding and uninterrupted participation in Indian capital markets.

Tax O Smart provides structured guidance on DTAA interpretation and related compliance requirements, helping non-resident taxpayers and FPIs navigate Form 10F filings and regulatory obligations under Indian tax law.

DISCLAIMER

The information contained in this document is prepared by R.J. Soni & Associates and TaxOSmart LLP (hereinafter referred to as RJSA) for information purpose only. It does not constitute any legal advice or tax advice. In no way, this document should be treated as a marketing material or efforts to solicit a client. While we have made every attempt to ensure that the information contained in this document is true, RJSA, its partners and/or any of its employees make no claims / guarantee about its accuracy, completeness, or up-to-date character, or warranty, express or implied, including the warranty of opinions expressed for a particular purpose, or assume any liability or responsibility for the accuracy, completeness, or usefulness of any information available from this document.