New tax compliance rules under the Income-tax Act, 2025 make timely filing essential for claiming treaty relief and avoiding higher tax deductions
Non-resident taxpayers earning income from India have been advised to complete key tax compliance requirements promptly to claim benefits under India’s Double Taxation Avoidance Agreements (DTAA), following changes introduced under the Income-tax Act, 2025.
As cross-border employment, investments and business transactions continue to grow, tax authorities have placed greater emphasis on procedural compliance for international taxation. Taxpayers seeking relief from double taxation or lower withholding tax rates under tax treaties must now ensure accurate and timely submission of the required documentation.
A central requirement is Form 41, introduced under Rule 75 of the Income Tax Rules, 2026. The form replaces the earlier Form 10F under Rule 21AB of the Income Tax Rules, 1962, and is linked to Section 159 of the Income-tax Act, 2025, which corresponds to the earlier Section 90A of the Income-tax Act, 1961.
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Form 41 must be filed electronically through the Income Tax Department’s e-filing portal before any foreign remittance is made and prior to the calculation and deduction of tax at source (TDS) by the Indian payer
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Tax professionals note that the form cannot be submitted after funds have been remitted outside India
The filing is required annually and remains valid only for the relevant financial year, running from 1 April to 31 March. Non-residents are expected to submit the form after obtaining a valid Tax Residency Certificate (TRC) from their home country’s tax authority. The validity period mentioned in Form 41 must match the period stated in the TRC.
The electronically verified Form 41 is also required by Chartered Accountants while issuing Form 146, the certificate used for foreign remittances and previously known as Form 15CB.
Failure to furnish Form 41 and the accompanying TRC may result in denial of DTAA benefits, leading to higher TDS under domestic tax provisions. For example, royalty income eligible for a 10% treaty rate could face a 20% withholding tax if the required documents are not submitted.
The requirement commonly affects non-resident shareholders claiming reduced tax on dividends, foreign consultants receiving professional fees, NRIs earning interest income, and overseas entities deriving taxable income from India.
Tax experts warn that with increasing scrutiny of international transactions and automated processing systems, procedural compliance has become critical to securing treaty benefits and avoiding disputes with tax authorities.
