New Forms 42 43 Under Income Tax Rules 2026 Introduced For Tax Residency Certificate In India
Forms 42 and 43 are introduced via Notification 5/2026, effective May 25, 2026, for TRC applications.
The Income Tax Department has introduced new rules for obtaining a Tax Residency Certificate (TRC) in India, impacting individuals and entities claiming treaty benefits. Notification 5/2026, effective today, mandates the use of newly prescribed Forms 42 and 43 for TRC applications. This change aims to streamline the process and ensure greater transparency in claiming benefits under Double Taxation Avoidance Agreements (DTAA). The move follows increased scrutiny of TRCs by tax authorities to prevent treaty abuse. Taxpayers seeking to avail DTAA benefits must now adhere to the updated procedures, providing detailed information as required in the new forms. Failure to comply may result in denial of treaty benefits and potential tax liabilities. The Central Board of Direct Taxes (CBDT) expects the revised forms to enhance the efficiency of TRC issuance and reduce instances of fraudulent claims.
Section 90 of the Income Tax Act, 1961, allows the Central Government to enter into agreements with foreign countries for the avoidance of double taxation. Rule 21AB prescribes the conditions for claiming relief under such agreements, including the requirement to obtain a TRC. Non-compliance with Rule 21AB can result in denial of treaty benefits and potential tax demands.
The introduction of Forms 42 and 43 signals a more stringent approach by the tax authorities towards TRC verification. Taxpayers should maintain thorough documentation to support their claims for treaty benefits. This change may lead to increased scrutiny and potential litigation, particularly for complex cross-border transactions.
CAs and CFOs must update their compliance procedures to incorporate the new TRC application process, ensuring clients can continue to avail DTAA benefits without disruption. Non-compliance can lead to tax liabilities and penalties.