A No PE Declaration is a written statement by a foreign company confirming it has no Permanent Establishment (PE) in India. It is a mandatory document for claiming DTAA treaty benefits on income sourced from India, such as royalties, fees for technical services (FTS), or interest. Without it, Indian tax authorities will withhold tax at domestic rates under Section 115A (20% + surcharge + cess) regardless of the applicable treaty rate.

• Required by: Foreign companies earning income (royalties, FTS, interest, dividends) from Indian payers
• Filed alongside: Tax Residency Certificate (TRC) and Form 10F
• Tax saved: DTAA rates (e.g., 10% for UAE, Sweden, Switzerland, Russia, China) vs. 20% under Section 115A

What Is a Permanent Establishment?

Under most DTAA agreements India has signed, a Permanent Establishment (PE) refers to a fixed place of business through which the enterprise wholly or partly carries on its business in India. This includes a branch, office, factory, workshop, mine, or a construction site lasting more than a specified period.

If a foreign company is found to have a PE in India, all income attributable to that PE becomes taxable in India as if it were a resident entity. The No PE Declaration is therefore a protective document: it asserts that the foreign company does not have such a footprint in India, making it eligible for the lower tax rates prescribed under the relevant DTAA.

Why Is No PE Declaration Mandatory?

The benefit of any DTAA between India and a foreign country is not automatic. Under Section 90 of the Income Tax Act and the rules framed thereunder, a non-resident must furnish specific documents to the Indian payer (or file with the Indian tax department) to receive treaty protection.

Indian tax authorities and the Indian payer (the company deducting TDS) require the following documents before applying a reduced DTAA rate:

• Tax Residency Certificate (TRC) from the country of residence
• Form 10F filed on the Indian Income Tax portal
• No PE Declaration confirming the absence of a permanent establishment in India
• PAN card issued by Indian tax authorities
• Income Tax login created on the Indian Income Tax portal
• DSC of the authorised foreign signatory (to file ITR or Form 10F, if applicable)

Without the No PE Declaration, the Indian payer is legally required to deduct TDS at the higher domestic rate of 20% under Section 115A + surcharge + cess, irrespective of what the DTAA specifies.

DTAA Rate vs. Domestic Rate: A Comparison

Country	DTAA Rate (Royalty / FTS)	Domestic Rate (Section 115A)	Saving with DTAA
UAE	10%	20% + surcharge + cess	Significant
Sweden	10%	20% + surcharge + cess	Significant
Switzerland	10%	20% + surcharge + cess	Significant
Russia	10%	20% + surcharge + cess	Significant
China	10%	20% + surcharge + cess	Significant
South Korea	10%	20% + surcharge + cess	Significant
Italy	20%	20% + surcharge + cess	Cess + Surcharge saved
Denmark	20%	20% + surcharge + cess	Cess + Surcharge saved

Note: DTAA rates apply only when the foreign company furnishes a valid No PE Declaration, TRC, Form 10F, and PAN. Treaty rates represent the base rate; confirm the applicable surcharge and cess position with a tax expert.

Key Elements of a No PE Declaration

A No PE Declaration is typically a signed letter on the foreign company's letterhead, addressed to the Indian payer or tax authority. It must contain the following elements:

1. Name and registered address of the foreign company
2. Country of incorporation and tax residence
3. Nature of income received from India (royalty, FTS, interest, etc.)
4. Explicit statement that the company does not have a PE in India as defined under the relevant DTAA
5. Confirmation that the income is not attributable to any PE or fixed base in India
6. Date and signature of the authorised signatory of the foreign company
7. Reference to the applicable DTAA (e.g., India-UAE DTAA, India-UK DTAA)

The declaration must be signed by an authorised representative of the foreign entity. Critically, a Digital Signature Certificate (DSC) of the foreign authorised signatory is required if the document is being submitted digitally on the Indian Income Tax portal. A regular DSC of an Indian director or partner will not be accepted for this purpose.

How to Obtain a DSC for a Foreign Signatory

This is often the most procedurally complex step. To obtain a DSC for a foreign authorised signatory, the following are required:

• Email OTP and phone OTP verification of the foreign individual
• Video verification of the foreign individual (live KYC)
• Address proof (e.g., driving licence, utility bill)
• Recent passport-size photograph
• Copy of valid passport

This DSC is then used to digitally sign Form 10F, the ITR (if filed), and other compliance documents on the Indian portal. Without this DSC, the foreign company cannot complete its compliance obligations in India to claim DTAA benefits.

Full DTAA Compliance Checklist for Foreign Companies

Claiming DTAA benefits in India requires assembling several documents and completing procedural steps. Here is a consolidated checklist:

Requirement	Purpose	Who Provides It
Tax Residency Certificate (TRC)	Proves tax residence in treaty country	Foreign tax authority
Form 10F	Mandatory declaration under Rule 21AB	Filed on Indian IT portal by foreign company
No PE Declaration	Confirms no permanent establishment in India	Foreign company (signed letter)
PAN Card	Required for ITR filing and Income Tax login	Issued by Indian Income Tax Department
Income Tax Login (India)	To file Form 10F and ITR	Created using PAN on Indian IT portal
DSC of Foreign Authorised Signatory	Digital signing of ITR and forms	Obtained through licensed Certifying Authority

When Must a Foreign Company File an ITR in India?

For income in the nature of royalty or FTS, a foreign company may choose to pay tax under Section 115A at 20% + surcharge + cess without filing an ITR in India. This is permissible as a standalone withholding tax option.

However, if the foreign company wishes to claim the benefit of a DTAA to avail a lower rate (say 10% under the India-UAE or India-Sweden DTAA), it is mandatory to file an Income Tax Return (ITR) in India. In that case, the full compliance stack applies: PAN, Income Tax login, DSC of the foreign authorised signatory, Form 10F, TRC, and No PE Declaration.

This distinction is important for foreign companies evaluating their compliance obligations before engaging with Indian entities.

Consequences of Not Submitting a No PE Declaration

• The Indian payer deducts TDS at 20% + surcharge + cess under Section 115A instead of the DTAA rate
• The foreign company loses the tax saving differential (e.g., 10% vs. 20% on royalty income)
• Recovery requires filing a refund claim in India, which involves full ITR compliance and significant delays
• Indian payer may face scrutiny for not withholding at the correct rate if documents are found to be non-compliant

How Taxocity Helps Foreign Companies

Taxocity has been supporting businesses with cross-border tax and compliance matters for over three decades. Our team of real human experts handles the complete DTAA compliance cycle for foreign companies earning income from India, including:

• Drafting and reviewing the No PE Declaration
• Applying for PAN card for foreign companies in India
• Creating the Income Tax login on the Indian portal
• Coordinating DSC of the foreign authorised signatory (including video KYC)
• Filing Form 10F and the ITR for the foreign company in India
• Liaising with the Indian payer to ensure correct TDS deduction

We provide a 100% compliance guarantee and end-to-end support from the initial document collection stage to the filing of returns, ensuring the foreign company pays only what is due under the applicable DTAA and not a rupee more.

Related Services

• Indian Tech Consultant Working for a Foreign Company: Tax and GST Guide
• PAN Card for Foreign Company in India
• Dubai Company and GST in India: Rules Explained
• GST Registration for Foreign Entities
• GST Filing Services

Key Takeaways

1. A No PE Declaration is mandatory for every foreign company claiming a reduced DTAA rate on Indian-sourced income.
2. Without it, TDS is deducted at 20% under Section 115A + surcharge + cess, regardless of treaty provisions.
3. It must be paired with a valid TRC, Form 10F, PAN, and Income Tax login to be effective.
4. A DSC of the foreign authorised signatory (not an Indian director's DSC) is required for digital filings.
5. If DTAA benefits are availed, the foreign company must file an ITR in India.
6. The full process requires coordinated effort across multiple Indian and foreign regulatory requirements.

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Disclaimer: This article is for general informational purposes only and does not constitute tax advice. Tax laws are subject to change, and individual circumstances vary. Please consult a qualified tax advisor before making any decisions related to DTAA compliance, TDS deduction, or filing obligations in India.