Double Taxation Survival Guide for Indian Freelancers with US/UK/EU Clients
How to handle foreign withholding tax, claim DTAA relief, obtain Tax Residency Certificate, and use Form W-8BEN
Written by
CA Ashama Rajawat
The Double Tax Problem
When foreign clients withhold tax on payments to you, AND India taxes the same income, you face double taxation. DTAA (Double Tax Avoidance Agreement) exists to prevent this.
✗Without DTAA Relief:
- •Invoice to US client: $10,000
- •US withholds 30%: $3,000
- •You receive: $7,000 (₹5,81,000)
- •India tax on ₹8,30,000 @ 30%: ₹2,49,000
- ⚠Effective tax: 60%!
With DTAA Relief:
- ✓US tax: $3,000 (₹2,49,000)
- ✓India tax: ₹2,49,000
- ✓Claim foreign tax credit: ₹2,49,000
- 🎉Net India tax: ₹0!
Form W-8BEN for US Clients
If your US client asks you to fill W-8BEN, it's to reduce withholding from 30% to 15% (or 10% under DTAA).
Certificate of Foreign Status for US tax withholding. Proves you're not a US person and enables reduced withholding rates under DTAA.
- 1.Part I: Your name, country (India), address
- 2.Part II: Claim treaty benefit (India-US DTAA)
- 3.Article: Article 12 for royalties, Article 15 for services
- 4.Rate: Withholding rate 15% (or 10% if specified)
Client withholds
Example: On $10,000 payment, you save $1,500 immediately!
Tax Residency Certificate (TRC) from India
TRC proves you're an Indian tax resident. Some foreign clients require this before making payments.
- ✓Login to incometax.gov.in
- ✓Services → Request for TRC
- ✓Fill Form 10FA
- ✓Processing: 7-15 days
- ✓Fee: ₹500
When TRC is Needed
For claiming DTAA benefits in foreign country, visa applications, or when client specifically requests it for verification
Claiming Foreign Tax Credit in India ITR
File ITR with Foreign Income
Declare gross amount (before foreign withholding) in your ITR-3
Fill Schedule FSI
Foreign Source Income schedule - enter country, income, tax paid abroad
Fill Schedule TR
Tax Relief schedule - claim foreign tax credit under Section 90/91
Upload Form 67
Supporting document showing foreign tax payment proof
Documents Required
Tax Withholding Certificate
From client showing tax withheld (like Form 1042-S for US)
Payment Proof
Bank statement showing foreign currency received
Client Contract/Invoice
Showing service nature and payment terms
TRC (if available)
Indian TRC proving you're resident here
Country-Specific Quick Guide
- •Form: W-8BEN
- •Withholding: 15%(with treaty)
- •Tax document: 1042-S
- ✓DTAA: Yes
- ✓Usually no withholding for services
- ✓DTAA relief automatic
- •Keep invoice records
- •Claim in India ITR
- ⚠Varies by country
- ✓Most: No withholding on services
- •Check specific country DTAA
- •Maintain detailed records
- •Withholding: 15%(typical)
- ✓DTAA available
- •Tax document: NR4 slip
- •Claim credit in India
Common Mistakes
Gross Amount Declaration
Not declaring gross amount in ITR (only showing net after foreign tax)
Missing Form 67
Forgetting to fill Form 67 and upload foreign tax proof
W-8BEN Not Filed
Not filing W-8BEN with US clients (paying 30% instead of 15%)
Excess Credit Claim
Claiming more foreign tax credit than Indian tax on same income
Conclusion
Double taxation is preventable through DTAA provisions. Always fill W-8BEN or equivalent forms for foreign clients to reduce withholding at source. Maintain documentation, declare full income in ITR, and claim foreign tax credit through Form 67. The process seems complex but becomes routine once you understand the workflow.