Form 10F Requirement for Royalty Payments: Japan-India DTAA Explained

If a Japanese company receives royalty or fees for technical services (FTS) from an Indian entity, it must submit Form 10F along with a Tax Residency Certificate (TRC) to claim reduced withholding tax rates under the Japan-India Double Taxation Avoidance Agreement (DTAA). Without Form 10F, the Indian payer must deduct TDS at the higher domestic rate under Section 115A of the Income Tax Act. Form 10F is mandatory for all foreign entities seeking DTAA benefits in India.

• Japan-India DTAA caps royalty withholding tax at 10% (vs. 20% under domestic Section 115A for non-residents)
• Form 10F must be filed online on the Indian Income Tax portal, requiring a PAN card and an Income Tax login for the foreign company
• A DSC (Digital Signature Certificate) of the foreign authorised signatory is mandatory to file ITR if DTAA benefits are claimed

What Is Form 10F and Why Is It Required for Japan-India DTAA?

Form 10F is a self-declaration form prescribed under Section 90(5) of the Income Tax Act, 1961 read with Rule 21AB. It is filed by a non-resident taxpayer (in this case, a Japanese company) to provide information that may be missing from its Tax Residency Certificate (TRC). The Indian government made online filing of Form 10F mandatory to prevent misuse of DTAA benefits.

Under the India-Japan DTAA (signed in 1989, updated in 2006), royalties and fees for technical services are taxable at a maximum rate of 10% in the source country (India). To claim this concessional rate, the Japanese company must prove its residency and eligibility to the Indian payer. Form 10F, along with a valid TRC, serves as that proof.

If Form 10F is not submitted, the Indian company making the royalty payment is legally required to deduct TDS at 20% (plus surcharge and cess) under Section 115A, which applies to royalties paid to foreign companies that have not furnished their tax residency documents.

What Are the Royalty and FTS Tax Rates Under Japan-India DTAA?

The Japan-India DTAA provides specific reduced rates for royalties and fees for technical/included services. These rates are significantly lower than the domestic withholding rates.

Income Type	Domestic Rate (Section 115A)	Japan-India DTAA Rate	Form 10F Required?
Royalty (Patents, Know-how, Software, etc.)	20% + surcharge + cess	10%	Yes
Fees for Technical Services (FTS)	20% + surcharge + cess	10%	Yes
Fees for Included Services	20% + surcharge + cess	10%	Yes

Important note: Under Section 115A, a foreign company receiving royalty or FTS income from India can pay tax at the flat rate of 20% and is not required to file an Income Tax Return (ITR) in India. However, if the Japanese company opts to claim the lower 10% DTAA rate, it must file an ITR in India and comply with all procedural requirements, including Form 10F, TRC, No PE Declaration, and digital signature.

What Documents Are Required for Form 10F (Japan-India DTAA)?

For a Japanese company to successfully claim DTAA benefits on royalty income from India, the following documents and compliances are mandatory:

1. Tax Residency Certificate (TRC)

A TRC is issued by the Japanese tax authority (National Tax Agency of Japan) confirming that the company is a tax resident of Japan. The TRC must be valid for the relevant financial year and contain specific details such as the taxpayer's name, address, country of residence, tax identification number, and the period of residency.

2. Form 10F

Form 10F must be filed electronically on the Indian Income Tax e-filing portal. It captures information not typically included in a TRC, such as the assessee's status (individual, company, firm), PAN (if allotted), nationality, country of incorporation, and the period of residency. Key steps:

• The Japanese company must obtain a PAN (Permanent Account Number) in India
• Register on the Income Tax portal using the PAN
• File Form 10F online with the DSC of the authorised signatory

3. PAN Card (Indian)

The Japanese company must apply for an Indian PAN card. Without PAN, the Indian payer is required to deduct TDS at 20% or the applicable rate, whichever is higher under Section 206AA. PAN is also needed to create the Income Tax login to file Form 10F online.

4. No Permanent Establishment (No PE) Declaration

A signed declaration from the Japanese company stating that it does not have a Permanent Establishment (PE) in India as defined under the Japan-India DTAA. If a PE exists in India, royalty income attributable to that PE would be taxed as business profits at the applicable business income rate, not at the concessional royalty rate.

5. DSC of the Foreign Authorised Signatory

This is a critical and often overlooked requirement. To file Form 10F and the ITR on the Indian portal, a Digital Signature Certificate (DSC) of the Japanese company's authorised signatory is mandatory. For obtaining DSC for a foreign individual, the following is required:

• Email OTP and phone OTP from the foreign individual
• Video verification of the foreign individual
• Address proof (such as a driving licence)
• Photograph
• Copy of passport

Note: A regular DSC of an Indian director or partner does not work for this purpose. The DSC must be of the foreign authorised signatory of the Japanese company.

6. Income Tax Login for the Foreign Company

A separate Income Tax portal login must be created for the Japanese company using its Indian PAN. This login is used to file Form 10F and subsequently the ITR, if DTAA benefits are being claimed.

How to Claim DTAA Benefit: Step-by-Step Process for Japanese Companies

Here is the end-to-end compliance process for a Japanese company to claim the 10% DTAA rate on royalty income from India:

1. Obtain TRC from Japan's National Tax Agency — Ensure it covers the relevant Indian financial year (April to March)
2. Apply for Indian PAN — File Form 49AA for foreign companies through a representative assessee
3. Create Income Tax Portal Login — Register on the incometax.gov.in portal using the PAN
4. Obtain DSC for the Foreign Authorised Signatory — Complete video verification and document submission as listed above
5. File Form 10F Online — Log in to the portal, navigate to Form 10F, fill in all required details, and submit with DSC
6. Submit TRC and No PE Declaration to Indian Payer — Provide the Indian company with the TRC, a copy of Form 10F acknowledgment, and the No PE declaration before payment is made
7. Indian Company Deducts TDS at 10% — With all documents in place, the Indian payer can legally deduct TDS at 10% instead of 20%
8. File ITR in India — If DTAA benefit is obtained, an ITR must be filed in India for the relevant assessment year

TDS Rates on Royalty Payments to Japan: At a Glance

Scenario	TDS Rate (Individuals)	TDS Rate (Other than Individuals / Companies)	ITR Filing in India Required?
No TRC / No Form 10F (domestic rate applies)	20% + surcharge + cess	20% + surcharge + cess	No (if only royalty/FTS income)
TRC + Form 10F submitted (DTAA rate)	10%	10%	Yes (mandatory if DTAA benefit claimed)
No PAN (Section 206AA applies)	20% or higher of applicable rate	20% or higher of applicable rate	Depends

Surcharge and cess: For foreign companies, surcharge is 2% (if income exceeds Rs. 1 crore but does not exceed Rs. 10 crore) or 5% (if income exceeds Rs. 10 crore). Health and Education Cess is 4% on the tax plus surcharge.

What Happens If Form 10F Is Not Filed?

Failing to file Form 10F or not furnishing the TRC has significant consequences for both the Japanese company and the Indian payer:

• Higher TDS deduction: The Indian company must deduct TDS at the higher domestic rate of 20% (plus surcharge and cess), effectively increasing the tax cost of the royalty payment
• Refund process: The Japanese company would need to file an ITR in India to claim a refund of excess TDS, which is a time-consuming process
• Disallowance risk: The Indian company paying royalty without proper DTAA documentation may face disallowance of the expense or penalties during an income tax assessment
• Interest and penalties: Short deduction of TDS (if DTAA rate is applied without documents) can attract interest under Section 201(1A) and penalty under Section 271C

Japan-India DTAA: Key Provisions on Royalties

Article 12 of the Japan-India DTAA deals with royalties and fees for technical services. Key definitional points that affect whether a payment qualifies as "royalty" under the treaty:

• Royalty includes payments for the use of patents, trademarks, designs, models, plans, secret formulas, software copyrights, industrial, commercial or scientific equipment, or scientific experience (know-how)
• Fees for Technical Services (FTS) includes managerial, technical or consultancy services, including the provision of services by technical or other personnel
• Income from "included services" that are ancillary to royalty-bearing property is also covered under the 10% rate
• The DTAA rate applies only if the Japanese company is the beneficial owner of the royalty income
• If the Japanese company has a PE in India and the royalty is effectively connected to that PE, the income is taxed as business profits, not at the royalty rate

How Taxocity Helps Japanese Companies with India DTAA Compliance

Taxocity has been helping foreign companies navigate Indian tax and compliance requirements since 1975, with a trust rating of 4.8/5 from over 5,000 reviews. For Japanese companies receiving royalty income from India, Taxocity provides complete end-to-end support:

• PAN application for the foreign company in India
• Income Tax portal registration and login creation
• DSC procurement for foreign authorised signatories, including video verification coordination
• Form 10F filing on the income tax portal with digital signature
• ITR filing in India for foreign companies claiming DTAA benefits
• No PE Declaration drafting and review
• Advisory on TRC requirements and liaison with the Indian payer for TDS compliance
• 100% compliance guarantee with real human experts at every step

Whether you are an Indian company making royalty payments to Japan or a Japanese firm receiving such income, Taxocity ensures you remain fully compliant while minimising your tax burden under the DTAA.

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Disclaimer: The information provided on this page is for general informational purposes only and does not constitute tax, legal, or professional advice. Tax laws and treaty provisions are subject to change. Please consult a qualified tax advisor or chartered accountant for advice specific to your situation before making any decisions related to taxation or DTAA compliance.