Direct Taxation

January 2026

Introduction

by Anjali Darak

Manager - Direct Tax

With the rise in cross-border employment, investments, and business transactions, taxpayers often face the challenge of being taxed on the same income in more than one country. To address this issue, India has entered into Double Taxation Avoidance Agreements (DTAA) with several countries. These treaties provide relief by allocating taxing rights between countries and reducing the overall tax burden. This article offers a step-by-step guide on how to claim DTAA benefits in India, helping taxpayers comply with the law while optimizing their tax liability.

Coming to this month’s, Taxation Times, here’s what we have:

An article on “How to Claim DTAA Benefits in India – A Step-by-Step Guide”.
Case Laws from various courts & jurisdictions.
Tax Compliance Calendar –January 2026
Circulars & Notifications – December 2025
Tax News from around the world

We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in.

Happy New Year!
Happy Reading!

Best Regards,
UJA Tax Team

How to Claim DTAA Benefits in India: Step-by-Step Tax Guide

With increasing cross-border income and global mobility, taxpayers often face the risk of double taxation, paying tax on the same income in two countries. To avoid this, India has entered into Double Taxation Avoidance Agreements (DTAA) with more than 90 countries.

This article explains what DTAA is, who can claim the benefit and the step-by-step procedure to claim DTAA benefits in India, along with key documents and common mistakes to avoid.

What is DTAA?

A DTAA is a treaty between two countries to ensure that income is not taxed twice. DTAA provides relief through:

Exemption method – income is taxed in only one country
Tax credit method – tax paid in one country is allowed as a credit in the other

Under Section 90 and 91 of the Income-tax Act, taxpayers can apply DTAA provisions if they are more beneficial than the Indian tax law.

Who Can Claim DTAA Benefits in India?

DTAA benefits can be claimed by:

Non-Residents (NRIs)
Foreign companies
Foreign nationals earning income in India
Indian residents earning income abroad (credit relief)

Types of Income Covered Under DTAA

DTAA typically covers:

Salary income
Interest income
Royalty and Fees for Technical Services (FTS)
Capital gains
Business profits
Dividend income

Each DTAA specifies tax rates and rules for different income categories.

Step-by-Step Guide to Claim DTAA Benefits in India

Step 1: Determine Your Residential Status

First, determine whether you are:

Resident
Non-Resident (NRI)
Resident but Not Ordinarily Resident (RNOR)

Residential status is crucial because DTAA applicability depends on it.

Step 2: Identify the Applicable DTAA

Check whether India has a DTAA with the country where:

Income is earned or
Tax has been paid

Each DTAA has specific articles governing different income streams.

Step 3: Obtain a Tax Residency Certificate (TRC)

A Tax Residency Certificate (TRC) is mandatory to claim DTAA benefits.

TRC must be issued by the tax authority of the resident country and should include:

Name of the taxpayer
Country of residence
Tax identification number
Period of residency

Without TRC, DTAA benefits may be denied.

Step 4: Furnish Form 10F

Usually, TRC does not contain all the required details as specified by income tax laws; the taxpayer must submit Form 10F electronically on the Indian Income Tax Portal.

Form 10F captures:

Nationality
Tax identification number
Address
Residential status

Step 5: Apply DTAA Rates at the Time of TDS (For Non-Residents)

For income subject to TDS in India, DTAA benefits are usually claimed at the time of deduction by providing:

TRC
Form 10F
No Permanent Establishment (PE) declaration (if applicable)

The payer applies to the lower of the DTAA rate or the domestic tax rate.

Step 6: Claim DTAA Benefit While Filing Income Tax Return

If excess tax has been deducted:

File Income Tax Return in India
Disclose foreign income and taxes paid
Claim DTAA relief under Schedule FSI and Schedule TR

Credit is allowed for tax paid in the foreign country as per DTAA provisions.

Step 7: Maintain Proper Documentation

Keep records such as:

TRC
Form 10F
Tax payment proof
Withholding tax certificates
Agreements/contracts

These documents may be required during scrutiny or assessment.

DTAA vs Income Tax Act: Which One Applies?

As per Section 90(2) of the Income-tax Act:
The taxpayer can apply either DTAA provisions or the domestic law, whichever is more beneficial.

Common Mistakes to Avoid

Not obtaining TRC
Late filing of Form 10F
Incorrect income classification
Claiming DTAA without filing a return
Ignoring Permanent Establishment (PE) provisions

Conclusion

Claiming DTAA benefits in India can significantly reduce tax liability if done correctly. Proper planning, accurate documentation and timely compliance are key to avoiding disputes and penalties.

For complex cross-border transactions, professional advice is recommended to ensure full and lawful utilization of DTAA benefits.

Case Laws

DECEMBER 2, 2025

[2025] 181 taxmann.com 76 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'H'
Balaji Powertronics v. Deputy Commissioner of Income-tax
DECEMBER 2, 2025

Section 92C of the Income-tax Act, 1961 - Transfer Pricing

Fact I :

The assessee was a manufacturer of Invertors and UPS, which were sold to two AEs as also to other dealers in the open market. The selling price charged from AE was comparable or less than the price charged from dealers in the open market.
The assessee claimed an adjustment as a manufacturing unit located in a backward area of Himachal Pradesh. The main incentives granted were a waiver of 12.50 per cent excise duty and a waiver of 2 per cent CST in Himachal Pradesh.
The TPO considered 6.09 per cent as an arm length profit ratio and made an addition of Rs. 21.09 crores.
The DRP, without considering the submissions of the assessee, passed the order keeping the additions at Rs. 21.89 crores.
On appeal to the Tribunal:

Held I:

It is crystal clear that the assessee had submitted that the manufacturing profit on account of benefit related to backward areas by way of waiver of 12 per cent for excise and 2 per cent for CST, being a backward area-specific order to be reduced to the Departmental Authorities of the assessee. Undisputedly, the assessee claimed an adjustment as a manufacturing unit located in a backward area of Himachal Pradesh. The main incentives granted are a waiver of 12.50 per cent excise duty and a waiver of 2 per cent CST in Himachal Pradesh. A Co-ordinate Bench in Sheela Foams Ltd. v. Asstt. CIT [2019] 107 taxmann.com 25 (Delhi – Trib.) had directed Assessing Officer/TPO to compute the operating profit margin without considering excise duty, sales tax and income tax. Therefore, the ground of appeal no. 1 is allowed. [Para 16].

Fact II :

The assessee-company was entitled to excise duty incentive under the Central Excise Notification No. 49-50/2003-CE, dated 10-6-2003, since the same was situated in the specified backward area. In terms of the said notification, the above undertakings were entitled to 100 per cent excise duty exemption for a period of 10 years from the date of commencement of commercial production. In terms of the above notification, the company had availed the excise duty incentive during the relevant year under consideration.
The purpose behind the introduction of the notification No. 49-50/2003 was to intensify and accelerate the growth of industries in the specified backward areas in the State of Himachal Pradesh/Uttaranchal. The excise duty exemption/incentive had been granted to the company for setting up of manufacturing unit which fell in the specified backward area. Since the incentive had been granted for setting up of manufacturing unit in a backward area, the same should be treated as a capital receipt.
The assessee submitted that the excise duty subsidy and interest subsidy received with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the State, by accelerated industrial development, were capital receipts.
On appeal to the Tribunal:

Held II:

Claim of excise duty, exemption as capital receipt while computing total income of normal provisions of the Act has been claimed by availing excise duty exemption during the year after the 10th year. The claim of excise duty exemption as capital receipts while computing the total income of normal provisions of the Act has been claimed. The assessee has claimed availing of excise duty exemption during the year, being the 10th year. High Court of Jammu & Kashmir in the case of Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/333 ITR 335 (Jammu & Kashmir) has held that Excise Duty subsidy, interest subsidy received with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the state by accelerating industrial development is capital receipts. A Co-ordinate Bench of Tribunal, Delhi, in the case of DCIT v. P.C. Jeweller Ltd. [2025] 175 taxmann.com 281 (Delhi – Trib.) has held a similar view. Accordingly, an additional ground of appeal is allowed. [Para 17]

[2025] 181 taxmann.com 165 (Pune - Trib.) IN THE ITAT PUNE BENCH 'B'
UBS Business Solutions (India) (P.) Ltd. v. Principal Commissioner of Income-tax
NOVEMBER 28, 2025

Section 37(1) read with sections 92C and 263 of the Income-tax Act, 1961

Facts I :

The assessee-company entered into international transactions with its AEs. It was engaged in the business of providing information and IT-enabled services to its AEs) operating outside India.
It filed its return of income for the assessment year 2020-21, declaring income of ₹30 crore.
The case was selected for complete scrutiny and an assessment was completed under section 143(3) read with section 144B, determining income at ₹52 crore.
The Principal Commissioner, after examination of the record, issued notice under section 263 and later revised the assessment holding it to be erroneous and prejudicial to the interest of revenue on the ground that repairs & maintenance expenses of ₹02 crore were not properly verified and certain computer peripherals such as mouse, headsets etc. ought to have been capitalized as per accounting policy.
In the instant appeal, the assessee submitted that such items in the ITES business undergo frequent replacement due to wear and tear and were rightly claimed as revenue expenditure.
It was further explained that the entire revenue was earned from AEs and services were billed at cost + 14.5% markup. Therefore, all operating expenses, including repairs & maintenance, had been fully recovered from AEs with a mark-up. The Transfer Pricing Report also reflected that entire receipts were AE-linked and no adverse inference existed.

Held:

In this case, facts as mentioned in the assessment order are that the assessee-company filed a return of income for the assessment year 2020-21, declaring total income at Rs. 3,70,30,64,670. The assessee’s case was selected for complete scrutiny. Assessment Order was passed under section 143(3) read with section 144B assessing the total income at Rs. 3,78,52,32,060. [Para 5]

The Principal Commissioner, after verifying the record, issued notice under section 263. The assessee filed an elaborate submission before the Principal Commissioner. However, the Principal Commissioner passed an order under section 263. The Principal Commissioner held that the assessment order was erroneous and prejudicial to the interest of the revenue. The main issue in the order of Principal Commissioner is that, according to the Principal Commissioner, the Assessing Officer has not verified the details of repairs and maintenance expenditure amounting to Rs. 21.02 crores. Principal Commissioner, after going through the replies filed by the assessee, came to the conclusion that certain items called Computer Peripherals like Headsets, Mouse etc., should have been capitalised as per the accounting policy of the assessee mentioned in the Audit Report. The assessee pleaded that in the ITES Industry, computer peripherals have to be replaced frequently due to wear and tear. Therefore, the assessee pleaded that these expenditures were revenue in nature. Principal Commissioner also held that the expenditure for the replacement of tiles was not revenue expenditure. [Para 6]

During the proceedings under section 263, the assessee had submitted before the Principal Commissioner that the assessee’s entire revenue is from its Associated Enterprises. Assessee had also submitted before Principal Commissioner that the Associated Enterprises are charged at cost + mark-up, therefore, there is no question of disallowance of any expenditure, as every expenditure is considered for cost + mark-up. However, the Principal Commissioner has erroneously referred in the order to reimbursement of expenses mentioned in Form 3CEB. [Para 7]

In this case, the most important fact is that, as per the Transfer Pricing Report, the assessee has entered into transactions with its AEs. [Para 7.1]

Thus, the total receipts of the assessee from the provision of software development services and ITES to its AEs is Rs. 19,63,31,51,534, which is the same as Revenue Receipts appearing in Profit and Loss Account. Thus, the entire Revenue Receipts are from Associated Enterprises (AE). In the Transfer Pricing Study Report, it is specifically mentioned that the assessee charges cost + 14.5% to its AEs for the services provided. There is no adverse inference regarding the facts mentioned in the Transfer Pricing Study Report of the assessee. In these facts and circumstances of the case, it is clear that Expenditure debited in the Profit and Loss Account is charged to the AEs with appropriate mark-up. The repairs and maintenance expenditure of Rs. 21.02 crores has been classified as Operating Expenditure by the assessee and hence considered for the cost charged to the AEs. [Para 7.2]

In these facts, once the entire repairs and maintenance expenditure has been recovered from the AEs with the appropriate mark-up, it is not as per law to state that the Assessment Order is erroneous and prejudicial to the interest of the revenue. Therefore, the Assessment Order is not erroneous and prejudicial to the interest of the revenue. Therefore, the order under section 263 is not sustainable as both the twin conditions for invoking of section 263 are not fulfilled in the instant case. [Para 8]

Conclusion: In favour of assessee

Circulars and Notifications August 2025

Circulars

ii. CAPITAL GAINS ACCOUNTS (SECOND AMENDMENT) SCHEME, 2025 - AMENDMENT IN PARAGRAPHS 1, 2, 3, 5, 7, 9, 10 AND 13; AMENDMENT IN FORM A AND FORM C

NOTIFICATION S.O. 5293(E) [F. NO.161/2025/F. NO. 370142/23/2024-TPL], DATED 19-11-2025

In exercise of the powers conferred by sub-section (2) of section 54, sub-section (2) of section 54B, sub-section (2) of section 54D, sub-section (4) of section 54F, sub-section (2) of section 54G, sub-section (2) of section 54GA and sub-section (2) of section 54GB of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme further to amend the Capital Gains Account Scheme, 1988, namely:

(1) This Scheme may be called the Capital Gains Accounts (Second Amendment) Scheme, 2025.

(2) It shall come into force on the date of its publication in the Official Gazette.

In the Capital Gains Accounts Scheme, 1988 (hereinafter referred to as the said Scheme), in paragraph 1, in sub-paragraph (3), after the figures and letter “54G”, the figures and letters “, 54GA” shall be inserted.
In the said Scheme, in paragraph 2,

(i) for clause (e), the following clause shall be substituted, namely:
‘(e)”Deposit Office” means any branch or branch office of
(i)the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955) or of a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or of a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980); or
(ii) a “banking company” as defined under clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is authorised by the Central Government, by notification in the Official Gazette, to receive deposit and maintain an account of the depositor under this Scheme;
(ii)in clause (f), after the figures and letter “54G”, the figures and letters”, 54GA” shall be inserted;
(iii) after clause (f), the following clause shall be inserted, namely: (fa) “electronic mode” means payment by use of an electronic clearing system through a bank account or by way of any of the following modes, namely:
(a) credit card
(b) debit card
(c) net banking
(d) IMPS (Immediate Payment Service)
(e) UPI (Unified Payment Interface)
(f) RTGS (Real Time Gross Settlement)
(g) NEFT (National Electronic Funds Transfer) and
(h) BHIM (Bharat Interface for Money) Aadhaar Pay.

4.In the said Scheme, in paragraph 3, after the figures and letter “54G”, the words, figures and letters “or section 54GA” shall be inserted.
In the said Scheme, in paragraph 5,

(a) In sub-paragraph (4), after the words “cheque or by draft”, the words “or by electronic mode” shall be inserted;
(b) For sub-paragraph (6), the following sub-paragraph shall be substituted, namely:
“(6) If the deposit is made by a cheque or a draft or by electronic mode then, subject to such cheque or draft or payment by such electronic mode being realised, the effective date of deposit for the purpose of claiming exemption under the Act shall be the date on which the cheque or draft or payment by such electronic mode is received by the deposit office along with the application made under sub-paragraph
(1) or sub-paragraph (5), as the case may be.”;
(c) In sub-paragraph (7), after the words “of the cheque or the draft”, the words “or the date of receipt of the deposit by electronic mode” shall be inserted.

In the said Scheme, in paragraph 7, in sub-paragraph (7), after the words “together with his passbook”, the words “or electronic statement of account” shall be inserted.
In the said Scheme, in paragraph 9,

(a) In sub-paragraph (1), after the words “together with the passbook”, the words “or electronic statement of account” shall be inserted;
(b) In sub-paragraph (2), after the words “in the passbook”, the words “or electronic statement of account, as applicable” shall be inserted;
(c) In sub-paragraph (4), after the words, brackets and figures “in sub-paragraph (3), by way of”, the words “electronic mode or” shall be inserted.

In the said Scheme, in paragraph 10, in sub-paragraph (1), after the words, figure and letter “of section 54G”, the words, brackets and figures “or sub-section (2) of section 54GA” shall be inserted.
In the said Scheme, in paragraph 13, after sub-paragraph (6), the following sub-paragraphs shall be inserted, namely:

(7) The option of closure of account to be exercised under this paragraph shall be furnished electronically either under a digital signature or electronic verification code on and from the 1st April, 2027.
(8) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or any person authorised by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, shall
(a) Specify the procedure for filing Form G and Form H;
(b) forward Form G or Form H, as applicable, to the Assessing Officer having jurisdiction over the applicant and upon approval by the Assessing Officer, to the applicant;
(c) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-paragraph (7), for verification of the person furnishing the said Form; and
(d) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.

In the said Scheme, in Form A,

(a) after the symbol, figures and letter “*54G/”, the symbol, figures and letters “*54GA/” shall be inserted.
(b) after the words “Demand Draft”, the symbols and words “/*by electronic mode” shall be inserted.
(c) after the words and letters “Demand Draft No. …… dated ……. drawn on …….”, the symbols and words “/ by electronic mode” shall be inserted.”

In the said Scheme, in Form C,

(a) In paragraph 2, after the word, figures, letter and symbol “section 54G/”, the word, figures, letters and symbol “section 54GA/” shall be inserted;
(b) In paragraph 3, in clause (ii), after the words “Demand Draft”, the symbol and words “/by electronic mode” shall be inserted;
(c) under the heading “FOR THE USE OF DEPOSIT OFFICE”, in clause (ii), after sub-clause (b), the following sub-clause shall be inserted, namely:
“(c) RTGS/IMPS/NEFT/Transaction No. ……………… dated………………………”.

Notifications

SECTION 80G OF THE INCOME-TAX ACT, 1961 - DEDUCTIONS - DONATIONS TO RELIGIOUS/CHARITABLE FUNDS, ETC. - NOTIFIED PLACES OF WORSHIP UNDER SECTION 80G(2)(b)

NOTIFICATION S.O. 5551(E) [NO. 166 / 2025/F. NO. 300176/2/2025/ITA-I] DATED 2-12-2025

In the exercise of the powers conferred by clause (b) of sub-section (2) of section 80G of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies “Shree Balakrishna Lalji & other deities temple” Bhuleshwar, Mumbai managed by Mota Mandir Trust, Mumbai, Maharashtra (PAN: AABTM9049C) to be place of historic importance and a place of public worship of renown throughout the states of Maharashtra and Gujarat for the purposes of the said section.

The Notification will be valid only for the renovation or repair of the “Shree Balakrishna Lalji & other deities temple” Bhuleshwar, Mumbai, to the extent of Rs. 50,00,00,000/-(Rupees Fifty Crore only) and will cease to be effective after the said amount has been collected or on 31-3-2030, whichever is earlier.

B. PRESS RELEASE:

CBDT LAUNCHES 2ND NUDGE INITIATIVE TO STRENGTHEN VOLUNTARY COMPLIANCE IN RESPECT OF FOREIGN ASSETS

PRESS RELEASE, DATED 27-11-2025

The Central Board of Direct Taxes (CBDT) continues to strengthen its data-driven, non-intrusive and taxpayer-centric measures aimed at improving voluntary compliance. The “Non-intrusive Usage of Data to Guide and Enable (NUDGE)” initiative reflects CBDT’s commitment to a forward-looking, technology-enabled and trust-based tax administration focused on promoting accurate reporting and enhancing revenue mobilization.

The first NUDGE campaign, launched on 17th November 2024, targeted select taxpayers who had been reported by foreign jurisdictions under the Automatic Exchange of Information (AEOI) framework as holding foreign assets that were not disclosed in their Income Tax Returns (ITRs) for AY 2024-25. The initiative yielded positive outcomes, with 24,678 taxpayers (including several not directly nudged) revisiting their returns and disclosing foreign assets amounting to Rs. 29,208 crore, along with foreign-source income of Rs. 1,089.88 crore.
CBDT receives information relating to foreign financial assets of Indian residents from partner jurisdictions pursuant to Common Reporting Standards (CRS) and from the United States under the Foreign Account Tax Compliance Act (FATCA). This information assists in identifying potential discrepancies and guiding taxpayers towards timely and accurate compliance.
Analysis of AEOI information for FY 2024-25 (CY 2024) has identified high-risk cases where foreign assets appear to exist but have not been reported in the ITRs filed for AY 2025-26. Accordingly, CBDT is launching the second NUDGE campaign, under which SMS and emails will be issued from 28th November 2025 to such taxpayers, advising them to review and revise their returns on or before 31st December 2025 to avoid penal consequences.
The campaign aims to facilitate correct reporting in Schedule Foreign Assets (FA) and Foreign Source Income (FSI) in ITRs. Accurate and complete disclosure of foreign assets and income is a statutory requirement under the Income-tax Act, 1961 and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Adopting a PRUDENT approach to tax administration, CBDT utilises advanced data analytics to simplify compliance processes, reduce information asymmetry and reinforce a transparent and trust-oriented interface with taxpayers. The initiative aligns with the vision of Viksit Bharat, fostering accountability, transparency and a culture of voluntary compliance.
CBDT advises all eligible taxpayers to utilise this opportunity to ensure complete compliance with statutory reporting requirements. For further information on CRS, FATCA, Schedule FA and Schedule FSI, taxpayers may refer to the official website www.incometax.gov.in.

Tax Calendar January 2026

07th January 2026

TDS/TCS Deposit: Due date for the deposit of Tax deducted/collected for the month of December 2025. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day on where tax is paid without production of an Income tax Challan

14th January 2026

Due date for issue of TDS Certificate for tax deducted under section 194S/194-IA/194-IB/194M in the month of August 2025

15th January 2026

Form 27EQ: Quarterly statement of TCS deposited for the quarter ending December 31, 2025
Form 15G/15H: Due date for furnishing of Form 15G/15H declarations received during the quarter ending December, 2025

30th January 2026

Form	Description
Form 26QB	Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of December, 2025
Form 26QC	Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of December, 2025
Form 26QD	Due date for furnishing of challan cum statement in respect of tax deducted under section 194M in the month of December, 2025
Form 26QE	Due date for furnishing of challan cum statement in respect of tax deducted under section 194S in the month of December, 2025
Form 27D	Quarterly TCS certificate in respect of tax collected for the quarter ending December 31, 2025

31st January 2026

Form 24Q/26Q/27Q: Quarterly statement of TDS deposited for the quarter ending December 31, 2025.
Form 3CEAC: Intimation under section 286(1) in Form No. 3CEAC, by a resident constituent entity of an international group whose parent is non-resident.

Tax News from Around the World

India–France Tax Treaty Revamp.

What’s happening: India and France finalized a renegotiated tax treaty, modernizing tax rights and dividend withholding rates. This affects how cross-border income (like dividends and capital gains) is taxed between the two countries.

Dispute Over Global Minimum Tax Rules.

What’s happening: China and several countries object to the U.S. carve-out in the OECD’s global minimum tax agreement, risking delays or revisions to the global tax deal that impacts income and corporate taxation worldwide.

Taxation of Wealth & High Earners.

Discussions continue worldwide, including proposals for a global minimum tax on billionaires — as policymakers seek to address equity and revenue challenges.