If a Canadian company receives royalty income from India, it must submit Form 10F along with a Tax Residency Certificate (TRC) to claim reduced withholding tax rates under the Canada-India Double Taxation Avoidance Agreement (DTAA). Without Form 10F, Indian payers must deduct TDS at the default rate of 20% under Section 115A instead of the treaty rate of 10-20% on royalties under Article 12 of the Canada-India DTAA. This guide is for Canadian companies, Indian payers, and finance teams handling cross-border royalty transactions.

• Default TDS on royalties (no DTAA claim): 20% under Section 115A of the Income Tax Act
• DTAA reduced rate on royalties: 10-20% (Canada-India DTAA, Article 12)
• Form 10F is mandatory to claim DTAA benefits since AY 2023-24 (must be filed online)

What is Form 10F and Why Does It Matter for Royalty Payments?

Form 10F is a self-declaration form prescribed under Section 90(5) of the Income Tax Act, 1961 (read with Rule 21AB). It is required when a non-resident (e.g., a Canadian company) wants to claim benefits under a Double Taxation Avoidance Agreement and their Tax Residency Certificate (TRC) does not contain all information prescribed by the Indian Income Tax Department.

For royalty payments flowing from India to Canada, the Indian payer (the company or individual making the royalty payment) is responsible for deducting TDS at the correct rate. The Canadian recipient must provide Form 10F, a valid TRC, and a No Permanent Establishment (No PE) Declaration to the Indian payer before the payment is made.

From 1 April 2023 onwards, Form 10F must be filed electronically on the Indian Income Tax portal (incometax.gov.in). This means the foreign company must obtain a PAN card in India and create an income tax login to file the form online. A foreign director's DSC (Digital Signature Certificate) is required for login and ITR filing purposes.

Canada-India DTAA: Applicable Royalty Tax Rates

The Double Taxation Avoidance Agreement between India and Canada was signed to prevent the same income from being taxed twice. Under Article 12 of the Canada-India DTAA, the withholding tax rate on royalties is capped at 10-20% of the gross amount. This is significantly lower than the default rate under Indian domestic law.

Scenario	Applicable Rate	Provision
No DTAA claim (default domestic law)	20% + surcharge + cess	Section 115A, Income Tax Act
DTAA benefit claimed (with Form 10F + TRC)	10-20% of gross royalty	Article 12, Canada-India DTAA
Fees for Technical Services (FTS)	10-20% of gross amount	Article 12, Canada-India DTAA

Important Note: Under Section 115A, a foreign company can pay tax on royalty or FTS income at the prescribed rate without filing an Income Tax Return (ITR) in India. However, if the Canadian company chooses to claim DTAA benefits to avail the lower 10-20% rate, it becomes mandatory to file an ITR in India. This is a critical distinction that many businesses overlook.

Complete List of Form 10F Requirements for Canada-India DTAA

To successfully claim DTAA benefits on royalty income, a Canadian company must fulfil all of the following requirements before the royalty payment is made by the Indian payer:

1. Tax Residency Certificate (TRC)

A TRC is an official certificate issued by the Canada Revenue Agency (CRA) confirming that the recipient company is a tax resident of Canada. The TRC must cover the relevant financial year for which the payment is being made. The TRC should ideally contain the following information as prescribed by Rule 21AB of the Income Tax Rules:

• Name and status of the taxpayer
• Nationality (or country of incorporation for companies)
• Tax identification number in Canada
• Residential status for tax purposes
• Period of validity of the TRC
• Address of the taxpayer in Canada during the relevant period

2. Form 10F (Online Filing Mandatory)

Where the TRC does not contain all the above particulars, the foreign company must file Form 10F on the Indian Income Tax e-filing portal. Key requirements for online filing:

• The Canadian company must obtain a PAN card in India (PAN application under Form 49AA for foreign entities)
• An income tax e-filing login must be created using the PAN
• A DSC (Digital Signature Certificate) of the authorised foreign signatory is mandatory for filing. Note: A regular DSC of an Indian director or partner does NOT work here. It must be the DSC of the authorised signatory of the foreign company
• For obtaining the foreign signatory's DSC, the following are required:
  • Email and phone OTP verification from the foreign individual
  • Video verification of the foreign individual
  • Address proof (e.g., Driving Licence or equivalent)
  • Photograph
  • Copy of passport

3. No Permanent Establishment (No PE) Declaration

The Canadian company must provide a self-declaration stating that it does not have a Permanent Establishment (PE) in India. If a PE exists, the DTAA exemption may not apply, and business profits attributed to the PE may be taxable in India. This declaration is submitted to the Indian payer and retained as part of the TDS documentation.

4. PAN Card (Mandatory)

The foreign company must obtain a valid PAN in India. Without PAN, TDS may be deducted at the higher rate of 20% or the applicable rate, whichever is higher, under Section 206AA. Having a PAN also enables the foreign company to file ITR in India if DTAA benefits are availed.

5. Income Tax Login and DSC

To file Form 10F online and to subsequently file an ITR (if DTAA benefit is claimed), the Canadian company must have an active income tax portal account (incometax.gov.in) with a valid DSC of the authorised signatory registered on the portal.

Step-by-Step Process: Claiming DTAA Benefits on Royalty from India

1. Obtain a PAN card for the Canadian company in India by filing Form 49AA with the Income Tax Department or through NSDL/UTIITSL
2. Get a Tax Residency Certificate (TRC) from the Canada Revenue Agency for the relevant financial year
3. Obtain DSC of the foreign authorised signatory (requires video verification, OTP, passport copy, and address proof as detailed above)
4. Create an income tax e-filing account on the Income Tax portal using the PAN and register the DSC
5. File Form 10F online on the Income Tax portal for the relevant assessment year
6. Issue a No PE Declaration to the Indian payer in writing
7. Submit all documents to the Indian payer: TRC + Form 10F acknowledgement + No PE Declaration + PAN copy
8. Indian payer deducts TDS at 10-20% (DTAA rate) instead of 20% (Section 115A rate)
9. If DTAA benefit is availed, the Canadian company must file an ITR in India for the relevant assessment year

Do You Need to File ITR in India for Royalty Income from India?

This is one of the most frequently misunderstood aspects of the Canada-India DTAA:

Approach	Tax Rate	ITR Filing Required?
Pay tax under Section 115A (no DTAA claim)	20% + surcharge + cess	No (ITR filing is not mandatory)
Claim DTAA benefit (10-20% rate)	10-20% of gross royalty	Yes (ITR must be filed in India)

A Canadian company earning royalties from India can choose to simply pay tax at the higher domestic rate of 20% under Section 115A and avoid the compliance burden of filing ITR in India. However, if the royalty amounts are significant, the 5% tax saving from the DTAA rate often justifies the additional compliance steps. Taxocity's DTAA specialists can help you evaluate the best option for your specific situation.

TDS Rates on Royalty Payments: At a Glance (FY 2025-26)

Recipient Type	Without DTAA (Section 115A)	With DTAA (Canada-India)
Foreign Company (e.g., Canadian company)	20% + 5% surcharge + 4% cess = ~21.84%	10-20% (flat, on gross royalty)
Non-Resident Individual	20% + applicable surcharge + 4% cess	10-20% (flat, on gross royalty)

Note: Section 206AA may apply if PAN is not provided, resulting in deduction at 20% or the applicable rate, whichever is higher.

Common Mistakes to Avoid

• Using an Indian director's DSC for Form 10F or ITR filing of the foreign company. Only the DSC of the authorised signatory of the foreign company is valid.
• Submitting Form 10F offline post April 2023. The CBDT has mandated online filing, and offline submissions are not accepted.
• Not obtaining PAN before filing. Without a PAN, Form 10F cannot be filed on the Income Tax portal, and TDS at a higher rate may apply.
• Assuming no ITR is needed when DTAA benefits are claimed. If the Canadian company avails the 10-20% DTAA rate, ITR filing in India is mandatory.
• Expired or period-mismatched TRC. The TRC must be valid for the financial year in which the payment is made.
• Missing No PE Declaration. Even if Form 10F and TRC are in order, the absence of a No PE Declaration can expose the Indian payer to disallowance of the DTAA rate.

How Taxocity Helps with Canada-India DTAA Compliance

Taxocity has been assisting businesses with cross-border tax compliance since 1975, with a trust rating of 4.8/5 from over 5,000 clients. Our team of real human DTAA experts offers end-to-end support for Canadian companies earning royalty or FTS income from India:

• PAN application for foreign entities (Form 49AA)
• Assistance with obtaining and verifying TRC from the Canada Revenue Agency
• DSC procurement for foreign authorised signatories (including video KYC coordination)
• Online Form 10F filing on the Income Tax portal
• Drafting the No PE Declaration
• ITR filing in India for the foreign company (where DTAA benefit is availed)
• TDS advisory for Indian payers to ensure 100% compliance

Whether you are the Indian company making the royalty payment or the Canadian recipient seeking to optimize your tax outflow, Taxocity provides a single window for all DTAA compliance needs.

Key Takeaways

1. Form 10F, TRC, and a No PE Declaration are the three core documents required to claim the 10-20% DTAA rate on royalties under the Canada-India DTAA
2. The Canadian company must have a PAN in India and file Form 10F online using the DSC of the foreign authorised signatory
3. If DTAA benefits are claimed, the Canadian company must file an ITR in India; if tax is paid under Section 115A at 20%, ITR filing is not mandatory
4. The DSC of the foreign authorised signatory is mandatory and cannot be substituted with the DSC of an Indian director or representative
5. Non-compliance exposes the Indian payer to TDS shortfall, interest, and penalties

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Disclaimer: This article is intended for general informational purposes only and does not constitute tax advice, legal advice, or professional consultation. Tax laws and treaty provisions are subject to change, and their application depends on the specific facts and circumstances of each case. Please consult a qualified tax advisor or DTAA specialist before making any decisions regarding your tax obligations. Taxocity does not assume any liability for actions taken based on the information provided in this article.