Indian companies making cross-border payments (royalties, FTS, dividends, interest) must comply with DTAA rules to deduct TDS at treaty rates instead of the default 20% + surcharge + cess under Section 115A. This checklist is for finance teams, CFOs, and compliance officers. Key facts: TDS under Section 115A is 20% + surcharge + cess; DTAA rates can be as low as 10% for countries like UAE, Sweden, and Switzerland; and the foreign payee must furnish TRC, Form 10F, No PE Declaration, and hold a valid PAN before reduced rates apply.

• Default TDS under Section 115A: 20% + surcharge + cess
• DTAA benefit reduces this to 10% for UAE, Sweden, Switzerland, Russia, China, South Korea
• Non-compliance exposes Indian companies to disallowance of expenses and interest/penalty

Why DTAA Compliance Matters in FY 2025–26

Every time an Indian company wires money abroad — whether for software licenses, cloud services, technical know-how, management fees, or professional services — it is potentially making a payment of "Royalty" or "Fees for Technical Services" (FTS). Under the Direct Tax Code 2025, these cross-border payments attract withholding tax in India.

Without proper DTAA documentation, the Indian company must deduct TDS at the full rate of 20% + surcharge + cess under Section 115A. With a valid DTAA claim, the rate can drop to 10% or lower — a significant saving that also affects the foreign vendor's cash flows and the commercial relationship.

Getting it wrong means disallowance of the entire payment as a business expense, interest under Section 201, and penalties. The checklist below covers every document and step your team must complete before making any cross-border payment under DTAA.

Pre-Payment DTAA Compliance Checklist

Step 1: Identify the Nature of Payment

Before applying any treaty rate, classify the payment correctly:

• Royalty: Payments for use of intellectual property — software, patents, trademarks, copyrights, know-how
• Fees for Technical Services (FTS): Payments for managerial, technical, or consultancy services
• Interest: Payments on loans or borrowings from foreign lenders
• Dividends: Distributions to foreign shareholders

The DTAA article applicable, and the treaty rate, depends entirely on correct classification. Misclassifying Royalty as FTS (or vice versa) can result in applying the wrong rate or the wrong treaty article.

Step 2: Identify the Applicable DTAA

India has DTAAs with over 90 countries. The applicable treaty is the one signed between India and the country of tax residence of the foreign payee — not the country of incorporation.

Refer to the table below for key treaty rates on Royalty and FTS:

Country	DTAA Rate (Royalty / FTS)	Section 115A Rate (Default)
UAE	10%	20% + surcharge + cess
Sweden	10%	20% + surcharge + cess
Switzerland	10%	20% + surcharge + cess
Russia	10%	20% + surcharge + cess
China	10%	20% + surcharge + cess
South Korea	10%	20% + surcharge + cess
Italy	20%	20% + surcharge + cess
Denmark	20%	20% + surcharge + cess

Note: Always verify the applicable DTAA article for the specific type of payment. Rates above apply to Royalty/FTS; interest and dividend rates may differ. For countries like Italy and Denmark where DTAA rates match Section 115A, still obtain documentation to confirm treaty applicability.

Step 3: Collect Mandatory Documents from the Foreign Payee

This is where most Indian companies fail. The foreign payee must provide ALL of the following before the payment is made:

1. Tax Residency Certificate (TRC)

The TRC is issued by the tax authority of the foreign country and confirms that the foreign company or individual is a tax resident of that country. Without a valid TRC, the DTAA benefit cannot be claimed, period. Key requirements:

• Must be in force for the financial year of payment
• Must mention the period of residency, country, and taxpayer identification number
• Typically valid for one financial year — obtain a fresh TRC every year

2. Form 10F

Form 10F is a self-declaration filed on the Indian income tax portal. It supplements the TRC by providing information that may be missing from it (such as PAN, nationality, and tax identification number). Since 2023, the CBDT requires Form 10F to be filed electronically by the non-resident on India's e-filing portal. This means:

• The foreign company must obtain a PAN in India (see Step 4)
• The foreign company must create an income tax login on the Indian e-filing portal
• Form 10F must be filed online by the foreign entity — not by the Indian payer

For country-specific Form 10F guidance, see our articles on Form 10F for UAE-India DTAA, Sweden-India DTAA, and Switzerland-India DTAA.

3. No Permanent Establishment (No PE) Declaration

The foreign payee must declare in writing that it does not have a Permanent Establishment (PE) in India. If a PE exists, the income attributable to the PE is taxable in India as business income — and the DTAA reduced rate may not apply. The No PE Declaration should:

• Be on the foreign company's letterhead
• Be signed by an authorised signatory
• Confirm no fixed place of business, dependent agent, or service PE in India
• Cover the specific financial year

Step 4: Ensure the Foreign Payee Has a PAN

A PAN (Permanent Account Number) is mandatory for the foreign company if it wishes to claim DTAA benefits, file Form 10F online, or file an ITR in India. The process:

• Apply for PAN using Form 49AA (for foreign companies) on the NSDL/UTI portal
• Submit supporting documents: certificate of incorporation, address proof, identity proof of the authorised signatory
• Without PAN, TDS must be deducted at 20% (or the rate applicable under Section 206AA, whichever is higher)

Step 5: Set Up the Foreign Company's Income Tax Login

To file Form 10F electronically, the foreign company must register on the Indian Income Tax e-filing portal. This requires:

• A valid PAN (obtained in Step 4)
• A valid email ID and mobile number (Indian or foreign OTP capable)
• DSC (Digital Signature Certificate) of the authorised foreign signatory (see Step 6)

Step 6: Obtain a DSC for the Foreign Signatory

This is a step most compliance teams overlook. Filing ITR and certain forms on the Indian income tax portal requires a Digital Signature Certificate (DSC). For a foreign company, the DSC must be of the authorised foreign signatory — not any Indian director or representative. A regular Indian DSC will not work here.

To obtain a DSC for a foreign individual, the following is required:

• Email and phone OTP verification from the foreign individual
• Video verification of the foreign individual
• Address proof (driving licence, utility bill, etc.)
• Passport-size photograph
• Copy of valid passport

This process can take time and requires coordination with the foreign signatory. Start early.

Step 7: Determine if ITR Filing is Required for the Foreign Company

This is a critical compliance point many Indian payers miss:

• If the foreign company does not claim DTAA benefit and pays tax under Section 115A, it is NOT required to file an ITR in India
• If the foreign company claims DTAA benefit (i.e., pays at a reduced treaty rate), it IS required to file an ITR in India

For Royalty/FTS specifically: Section 115A allows the foreign company to pay tax at 20% and avoid ITR filing. But if it invokes DTAA to pay at 10%, it must file an ITR in India for that financial year. The Indian payer must ensure this obligation is communicated to the foreign payee.

TDS Deduction and Deposit Checklist

Once all documents are in place, follow this process for TDS deduction and deposit:

1. Verify all documents are current — TRC, Form 10F, and No PE Declaration must all pertain to FY 2025–26
2. Determine the correct TDS rate — DTAA rate (e.g., 10%) vs. Section 115A default (20% + surcharge + cess)
3. Deduct TDS at the correct rate at the time of credit or payment, whichever is earlier
4. Deposit TDS with the government by the 7th of the following month (or 30 April for March deductions)
5. File TDS Return (Form 27Q) quarterly for all payments to non-residents
6. Issue Form 16A (TDS Certificate) to the foreign payee within 15 days of the due date of filing the TDS return

Common Mistakes to Avoid

Mistake	Consequence	How to Avoid
No TRC obtained before payment	DTAA benefit denied; TDS short deduction	Collect TRC before making first payment of the year
Form 10F not filed electronically	DTAA claim invalid; defective return	Get foreign company's PAN and e-file portal login set up
Using Indian director's DSC for foreign company filing	Filing rejected; ITR/Form invalid	Obtain organisational DSC of the foreign authorised signatory
Foreign payee claims DTAA but doesn't file ITR	Non-compliance notice to Indian payer	Contractually require foreign payee to file ITR if DTAA is claimed
TRC for previous year used	DTAA claim invalid for current year	Refresh TRC every financial year
No PE Declaration not obtained	Entire payment may be treated as PE income	Obtain written No PE Declaration annually

Quick Summary: Full DTAA Document Checklist

• Tax Residency Certificate (TRC) — valid for FY 2025–26
• Form 10F — filed electronically on Indian income tax portal by foreign company
• No PE Declaration — signed by authorised signatory of foreign company
• PAN of the foreign company in India
• Income tax login (e-filing portal registration) of the foreign company
• DSC of the authorised foreign signatory (organisational DSC)
• ITR filing by foreign company (mandatory if DTAA benefit is claimed)
• Form 27Q TDS return filed quarterly by Indian company
• Form 16A issued to foreign payee

How Taxocity Helps with DTAA Compliance

Taxocity has been helping Indian businesses navigate cross-border tax compliance for over three decades. Our DTAA compliance service covers the entire workflow — from identifying treaty applicability and obtaining foreign DSCs, to filing Form 10F, creating income tax logins for foreign companies, and ensuring timely TDS returns.

Our real human experts handle the coordination with foreign signatories for DSC and video verification, apply for PAN on their behalf, and ensure 100% compliance at every step. With a 4.8/5 rating from 5,000+ clients, we provide end-to-end support so your finance team doesn't get stuck on cross-border compliance complexities.

For country-specific guidance, explore our detailed resources:

• Form 10F for China-India DTAA Royalty Payments
• Form 10F for Russia-India DTAA Royalty Payments
• Form 10F for South Korea-India DTAA Royalty Payments
• Form 10F for Italy-India DTAA Royalty Payments

Disclaimer

This article is for informational purposes only and does not constitute tax advice. DTAA provisions, treaty rates, and compliance requirements are subject to change. Please consult a qualified tax advisor before making any cross-border payments or taking positions based on DTAA benefits.