Exemption from filing form

Exemption from Filing Form 10F — What Non-Residents and Indian Payers Must Know in FY 2026-27

A non-resident claiming DTAA relief on Indian income must give the Indian payer two documents: a Tax Residency Certificate (TRC) issued by the home country's tax authority, and — if that TRC omits any of the five prescribed particulars listed in Rule 21AB of the Income Tax Rules, 1962 — a self-declaration in Form 10F. The temporary CBDT exemption that allowed non-residents without an Indian PAN to file Form 10F manually has lapsed. From FY 2026-27 onward, electronic filing on the income-tax e-filing portal is mandatory. Without a valid, e-filed Form 10F (where required) plus a current TRC, the Indian payer must withhold at the higher domestic or Section 206AA rate — which can be 20% or more.

Why DTAA Relief Requires More Than a Foreign Tax Certificate

When an Indian company pays a non-resident — for royalties, fees for technical services (FTS), dividends, interest, or business income routed through a permanent establishment — it is the payer who is the withholding agent under Section 195 of the Income-tax Act, 1961. The payer must identify the applicable rate before the wire goes out. Getting that rate wrong converts the payer into an "assessee in default" under Section 201, with interest and penalty consequences that can dwarf the original tax.

The beneficial tax rate under a Double Taxation Avoidance Agreement (DTAA) signed between India and the non-resident's country of residence is available only if the non-resident establishes two things:

1. Residence — they genuinely live or are incorporated in the treaty country, evidenced by a TRC for the relevant period.
2. Missing particulars — if the TRC does not spell out every item listed in Rule 21AB(1), Form 10F bridges the gap.

Rule 21AB was inserted by a 2012 amendment to formalise what was previously an informal practice. The rule is not a procedural technicality; it is the statutory basis on which the assessing officer and the deductor both rely when accepting a DTAA rate. If either document is absent or expired, the deductor cannot safely apply the treaty rate.

When Is Form 10F Required — and When Can You Skip It?

Form 10F is not required in two situations:

• The non-resident's TRC already contains all five prescribed particulars (see the next section), in which case Rule 21AB(1) is fully satisfied by the TRC alone.
• The payment is not covered by a DTAA, and the payer is applying the domestic withholding rate (the treaty relief route is not being invoked at all).

Form 10F is required whenever:

• The non-resident wants to invoke a DTAA to reduce or eliminate Indian TDS, and
• The TRC issued by the foreign tax authority omits even one of the five particulars.

In practice, TRCs from many countries — the United States, Germany, Singapore, the Netherlands, and the United Kingdom among them — are issued in a standardised format that frequently omits the taxpayer identification number in numeric form, or specifies only the calendar year rather than the Indian financial year period. That one gap triggers the Form 10F requirement.

A useful working rule: assume Form 10F is needed unless your TRC lawyer has confirmed in writing that the TRC covers all five points. The cost of filing Form 10F unnecessarily is trivial. The cost of omitting it when required is not.

The Five Prescribed Particulars Under Rule 21AB

Rule 21AB(1) lists the particulars that must appear — either in the TRC or, if absent, in Form 10F:

1. Status of the non-resident: individual, company, firm, body of individuals, or any other classification.
2. Nationality (for individuals) or country of incorporation / registration (for entities).
3. Taxpayer identification number (TIN) in the country of residence, or, where no TIN is issued, a unique number by which the non-resident is identified by the government of that country.
4. Period of residential status for which the TRC is applicable — this must align with the financial year in which the Indian income is received.
5. Address of the non-resident in the country of residence during the period for which TRC is applicable.

Note that the non-resident's name is captured by the TRC itself, not separately required in Form 10F. What Form 10F does is reproduce these particulars in a standardised Indian format that the income-tax department can read, verify against Form 26AS / AIS, and link to the deductor's TDS filing.

Form 10F is year-specific. A Form 10F filed for FY 2025-26 is not valid for FY 2026-27. This catches many payers off-guard when they rely on documentation collected for the previous year's first payment.

The PAN-less Exemption: History and What Changed in FY 2026-27

The story of the manual-filing exemption is worth understanding because it explains why many teams that managed this process a few years ago need to revisit their procedures.

CBDT made e-filing of Form 10F mandatory from 16 July 2022 via Notification No. 03/2022. The problem: e-filing on the income-tax portal requires registration, which in turn requires an Indian PAN. Many non-residents — especially those whose only Indian income is a one-off royalty or a dividend — had no reason to hold a PAN.

Recognising this friction, CBDT issued a series of circulars granting a temporary exemption allowing non-residents without a PAN to continue filing Form 10F manually (i.e., as a signed physical or PDF document handed to the payer). This exemption was extended multiple times, most recently through 30 September 2023, before being allowed to lapse.

The current position for FY 2026-27:

• PAN is required for registration on the e-filing portal to file Form 10F.
• Non-residents who do not have a PAN must apply for one through the prescribed online process (Form 49AA for non-residents) before they can e-file.
• The income-tax portal provides a dedicated registration pathway for non-resident entities and individuals — the process has been improved since 2022 and typically takes 7–15 working days once the application is complete.
• There is no valid manual-filing route for FY 2026-27. A payer who accepts a manually signed Form 10F PDF and relies on it to apply treaty rates is exposed to a Section 201 demand if audited.

The practical implication: any non-resident vendor, royalty recipient, or service provider who expects to invoice an Indian entity should be asked — well before the first payment — whether they hold an Indian PAN and whether their Form 10F for FY 2026-27 has been filed. Chasing this after the invoice date creates avoidable risk.

How to E-File Form 10F on the Income Tax Portal: Step-by-Step

The filing process, once the non-resident holds a PAN, is straightforward. Here is the sequence as it stands on the portal for FY 2026-27:

Prerequisites

• Active Indian PAN (Form 49AA for non-resident entities/individuals)
• TRC issued by the home-country tax authority, covering at least FY 2026-27 (1 April 2026 to 31 March 2027) or the relevant part-year
• Digital Signature Certificate (DSC) of the non-resident entity, or Aadhaar OTP where an individual non-resident holds Aadhaar

Filing sequence

1. Log in to unknown node using the non-resident's PAN credentials.
2. Navigate to e-File → Income Tax Forms → File Income Tax Forms.
3. Select Form 10F from the list of non-ITR forms (under "Persons not dependent on any source of income").
4. Select the Assessment Year 2027-28 (for FY 2026-27 income — this is a common point of confusion).
5. Fill in the prescribed particulars: status, nationality / country of incorporation, TIN, period of residential status, and address. The portal auto-populates the name from the PAN database.
6. Upload a PDF of the TRC (file size limit: 5 MB).
7. Verify and sign using DSC (mandatory for companies) or EVC / Aadhaar OTP (permitted for individuals where applicable).
8. Submit. The portal generates an acknowledgement number — download and save this as a PDF.
9. Send the acknowledgement PDF, along with a copy of the TRC, to the Indian payer before the first payment.

What the payer does next: File both documents in the TDS master record for that vendor, note the AY 2027-28 validity, and flag a calendar reminder for April 2027 to collect fresh documentation for FY 2027-28.

Worked Example: The Real Cost of Missing Form 10F

Consider a practical scenario. TechServ BV, a Netherlands-based entity, provides ongoing software customisation services to an Indian private limited company, Mfg Co Pvt Ltd. The services qualify as Fees for Technical Services under the India-Netherlands DTAA, which caps the Indian withholding rate at 10%.

Annual contract value: Rs. 60,00,000 (Rs. 60 lakh).

Scenario A — Full documentation in place (TRC + e-filed Form 10F):

• Applicable DTAA rate: 10%
• TDS deducted: Rs. 6,00,000
• Net remittance: Rs. 54,00,000

Scenario B — Form 10F missing, PAN held by non-resident:

• Applicable rate: domestic rate under Section 115A = 10% (same here, but treaty benefit cannot be formally invoked)
• TDS deducted: Rs. 6,00,000 (numerically identical but procedurally incorrect)
• Risk at TDS assessment: officer disallows treaty rate for lack of Rule 21AB compliance → applicable rate becomes 20% under Section 206AA if PAN not verified in the deductor's record, or the officer may treat the deduction as short by reference to the domestic FTS rate vs. a different characterisation

Scenario C — Form 10F missing AND no PAN:

• Section 206AA applies. TDS at 20% (or double the applicable rate, whichever is higher).
• TDS that should have been deducted: Rs. 12,00,000
• TDS actually deducted: Rs. 6,00,000 (at 10%)
• Shortfall: Rs. 6,00,000
• Interest under Section 201(1A): 1.5% per month on Rs. 6,00,000 from date of payment
• Assume the shortfall is detected and paid 10 months later: Rs. 6,00,000 × 1.5% × 10 = Rs. 90,000
• Penalty under Section 271C: up to Rs. 6,00,000 (equal to the amount of TDS not deducted)
• Total exposure on a Rs. 60 lakh contract: Rs. 6,90,000 — more than 11% of contract value

The asymmetry is stark. The effort to obtain and file Form 10F is a few hours of co-ordination. The downside of skipping it is an exposure that can run to six figures even on a mid-sized contract.

The Payer's Responsibility Under Section 195

Under Section 195 of the Income-tax Act, 1961, the obligation to withhold tax rests entirely with the Indian payer — not the non-resident recipient. This means:

• You cannot outsource the responsibility to the non-resident's CA or say "they told us treaty rate applies."
• You must independently verify that the TRC is valid for the payment period and that Form 10F has been e-filed (check the acknowledgement number and AY).
• Where you are unsure of the characterisation of the payment (royalty? FTS? business income?), file an application under Section 195(2) to the assessing officer for determination, or obtain Form 15CB certification from a practicing CA who has reviewed the treaty and the contract.
• Keep the documentation file for seven years from the end of the relevant AY (until AY 2034-35 for FY 2026-27 documents), because TDS assessments can be reopened for that period.

Additional documentation that prudent payers collect alongside Form 10F:

• No-PE (Permanent Establishment) declaration from the non-resident confirming no fixed place of business or dependent agent in India. Without this, business profit attributable to a PE is taxable in India regardless of treaty entitlement.
• Beneficial ownership declaration — required under several treaties (UK, Netherlands, Singapore) for reduced rates on dividends, interest, and royalties to ensure the recipient is the beneficial owner, not a conduit entity.
• Form 15CA (Part C) and Form 15CB for remittances above Rs. 5,00,000 to non-residents (unless covered by specific exemptions listed in Rule 37BB).

What Happens at a TDS Assessment Without Form 10F

A TDS survey or scrutiny under Section 195 / 201 typically proceeds as follows when documentation is incomplete:

1. Show-cause notice: The assessing officer identifies a remittance to a non-resident at a treaty rate and asks the deductor to produce TRC and Form 10F for the assessment year in question.
2. Demand assessment: If Form 10F is absent or covers the wrong period, the officer recalculates TDS at the higher domestic rate (or 206AA rate if PAN was absent from deductor's records).
3. Interest demand under 201(1A): Calculated at 1% per month from the date on which tax was deductible to the date of deduction, and at 1.5% per month from the date of deduction to the date of actual payment.
4. Penalty under 271C: The assessing officer may levy a penalty equal to the amount of tax not deducted. While officers have discretion, the penalty is frequently imposed where documentation was entirely absent.
5. Disallowance under Section 40(a)(i): In a corporate income-tax assessment, the payment to the non-resident may be disallowed as a business expense to the extent TDS was short-deducted, creating a further income-tax demand at the deductor-company level.

This cascade — TDS demand + 201(1A) interest + 271C penalty + 40(a)(i) disallowance — is why professional advisors describe Form 10F compliance as a cost of doing business, not an optional overhead.

Common Mistakes and How to Avoid Them

1. Relying on last year's Form 10F Form 10F and the TRC are year-specific. A FY 2025-26 Form 10F (AY 2026-27) is invalid for FY 2026-27 payments. Build a supplier-wise calendar that flags expiry every 31 March.

2. Collecting documents after the first payment Section 195 TDS must be deducted at the time of credit or payment, whichever is earlier. Collecting Form 10F three weeks after the wire has left means you deducted short (or nil) without documentation. The safe practice is a hard stop in the accounts-payable system: no foreign wire processes without Form 10F acknowledgement on file.

3. Accepting a manually signed Form 10F PDF For FY 2026-27 this is not valid. The acknowledgement must show the portal-generated receipt number and date. If a vendor sends you a signed PDF without a portal acknowledgement number, the filing has not occurred.

4. Mismatched period in the TRC Many foreign TRCs are issued for the calendar year (1 January to 31 December). If your payment falls in Q1 of FY 2026-27 (April–June 2026), a TRC covering calendar year 2026 covers that period. But a TRC issued for calendar year 2025 does not. Read the TRC dates, do not assume.

5. Treating Form 10F as a substitute for a no-PE declaration Form 10F establishes residence and missing TRC particulars — it says nothing about whether the non-resident has a PE in India. A separate no-PE letter, renewed each year, is required to claim business-income exemption under most tax treaties. These are two different documents serving two different purposes.

6. Not filing Form 15CA / 15CB alongside Form 10F supports the treaty-rate determination. It does not substitute for the Form 15CA / 15CB filing requirement under Section 195(6) for remittances covered by Rule 37BB. Both compliance tracks must run in parallel.

7. Uploading an expired or future-dated TRC The TRC must be current at the time of payment. A TRC with a start date of 1 October 2026 does not cover a payment made in May 2026. Check both the start and end date before treating the TRC as valid.

Key Takeaways

• Form 10F is triggered by an incomplete TRC, not by every cross-border payment. Check your TRC against the five Rule 21AB particulars before deciding whether the form is needed.
• The PAN-less manual filing exemption has lapsed. For FY 2026-27 (AY 2027-28), e-filing on the income-tax portal is the only valid route. Non-residents without a PAN must obtain one via Form 49AA before the first Indian payment.
• Form 10F is year-specific. A form filed for AY 2026-27 does not cover AY 2027-28. Collect fresh documentation every April.
• The payer — not the non-resident — bears Section 195 liability. A shortfall can trigger interest at 1.5% per month, plus a penalty equal to the undeducted TDS, plus an income-tax disallowance under Section 40(a)(i).
• Form 10F is necessary but not sufficient. A complete treaty-benefit file also includes a valid TRC, a no-PE declaration, a beneficial ownership confirmation (where the treaty requires it), and Form 15CA/15CB where the remittance threshold is crossed.
• Build the documentation trigger before the first payment. An accounts-payable gate that requires an e-filed Form 10F acknowledgement number costs nothing to implement and eliminates the entire compliance risk.
• Seven-year retention: Keep all TDS files — TRC, Form 10F acknowledgement, Form 15CA, Form 15CB, no-PE letter — until AY 2034-35 for payments made in FY 2026-27.