[Opinion] Old vs. New Tax Rules – The Mandatory Filing of Form 41 for DTAA Benefits

Manish Harchandani – [2026] 187 taxmann.com 7 (Article)

For non-residents and foreign entities earning income in India, claiming relief under Double Taxation Avoidance Agreements (DTAAs) has undergone a structural transformation. The transition from the legacy Income-tax Act, 1961 to the Income-tax Act, 2025 brings a critical shift in compliance. The most significant change is the mandatory filing of Form 41, replacing the old conditional framework of Form 10F.

This comprehensive guide breaks down the statutory transition from Section 90 to Section 159, explains the old vs. new documentation rules, and details the severe consequences of non-compliance if foreign entities fail to file Form 41 electronically.

1. The Statutory Transition – From Section 90 to Section 159

Under the old Income-tax Act, 1961, a taxpayer’s ability to claim relief from double taxation and the Central Government’s power to enter into DTAAs were governed by Section 90. To secure these treaty benefits, non-residents were required to furnish a Tax Residency Certificate (TRC) along with additional prescribed information, which was historically captured via Form 10F.

With the introduction of the new Income-tax Act, 2025, the provisions for Double Taxation Relief have been structurally mapped and repositioned to Section 159. This shift is not merely a change in section numbers; it introduces rigid statutory preconditions for claiming treaty relief.

2. The Old Legal Position – Why Form 10F Was Conditional

To understand the current mandate—and why many clients mistakenly believe supplementary forms are optional—it is essential to look at the old legal framework under Sections 90/90A and Rule 21AB. Under the 1961 Act, filing Form 10F was conditional, not an absolute requirement in every single case.

2.1 The TRC and Supplementary Information

To claim DTAA relief, Section 90(4) made it mandatory to obtain a TRC from the home country’s government. Because different countries issue TRCs in varying formats that might lack specific details required by Indian tax authorities, Sections 90(5) required the assessee to provide “such other documents and information, as may be prescribed.”

2.2 Form 10F and the Crucial Exemption

To fulfill this requirement, the Central Board of Direct Taxes (CBDT) introduced Rule 21AB, prescribing Form No. 10F. This rule required non-residents to declare five specific data points:

Status of the assessee (individual, company, firm, etc.)
Nationality or country of incorporation
Tax Identification Number (TIN) or unique identifier
Period of validity of the TRC
Address outside India during the TRC validity period

However, Rule 21AB(2) provided a crucial statutory relaxation. It explicitly stated that an assessee was not required to furnish Form 10F if all the specified information was already contained within the TRC issued by the foreign government.

Under the old law, Form 10F merely acted as a supplementary document to “fill the gaps.” If the TRC was comprehensive, the taxpayer was legally exempt from filing it.

(Note – Even with this exemption, Rule 21AB(2A) mandated that taxpayers keep and maintain substantiating documents for potential verification by tax authorities.)

3. The New Legal Position – Strict Preconditions Under Section 159(8)

The Income-tax Act, 2025 deliberately eliminates the previous leniency. The conditional relaxation that existed under Rule 21AB(2) has been structurally replaced, making supplementary documentation an absolute precondition.

The new Section 159(8) strictly codifies the documentation requirements. It explicitly states that a non-resident assessee shall be entitled to claim DTAA relief “only when” they meet two specific conditions:

They obtain a Tax Residency Certificate (TRC) from the government of their home country or specified territory.
They provide “such other documents and information, as may be prescribed.”

To enforce this second condition, Rule 75 of the new rules prescribes Form No. 41 as the mandatory document.

Because Section 159(8) utilises the exclusionary language “only when,” the filing of Form 41 is transformed into a strict statutory precondition. It is strictly mandatory and not directory. It must be satisfied to unlock treaty benefits, regardless of what information is printed on the TRC itself.

Furthermore, Rule 75(2) mandates that the non-resident must keep and maintain documents to substantiate the information provided in Form 41, which income-tax authorities may call upon to verify the claim.