India-UAE DTAA Benefits for NRIs Living in UAE: Tax Savings & Compliance

Neha Navaneeth

Marketing and Content Associate

Aug 22, 2025

Taxation

Taxation

Living and working in the UAE brings a world of opportunities. Living in the UAE means no income tax locally - but for Indian NRIs, figuring out what’s taxable back home can be surprisingly tricky. Which earnings count? What do you owe?

While the UAE doesn’t tax your income, you may still have tax obligations in India- especially on income earned there. The India-UAE DTAA (Double Taxation Avoidance Agreement) ensures you’re not taxed twice on the same income.

Determining Tax Residency under the India UAE DTAA

If a person is in the UAE for at least 183 days in the calendar year, they are considered a UAE resident for this treaty. Physical presence is the basis for Indian tax law’s residency rules. This is important for UAE NRIs to know so they can apply the right UAE - India tax treaty rules.

Taxation of Income for UAE NRIs under the India UAE DTAA

Capital Gains

This is a critical area for most investors, and the distinction made within the India-UAE DTAA is significant. But the rules differ by asset, and your Tax Residency Certificate (TRC) decides which ones apply to you.

  • On Mutual Funds:

    As a UAE tax resident with a TRC, capital gains from selling Indian mutual-fund units are taxable only in the UAE. Since the UAE has no personal income tax, those gains are effectively tax-free in India - one of the DTAA’s clearest benefits.


  • On Direct Equity Shares:

    Under the India-UAE DTAA, India retains the right to tax capital gains from the sale of shares in Indian companies, meaning such gains are taxed according to Indian domestic laws.

Example: Suppose you make ₹5 lakh from an Indian mutual fund and ₹2 lakh from selling Indian shares.

  • With TRC:

    You pay 0 tax in India on the ₹5 lakh mutual fund gain, a direct benefit of the India-UAE DTAA. The ₹2 lakh share gain is taxed under Indian law.

  • Without TRC:

    You will not be able to claim Tax Deducted at Source (TDS) during income tax return filing. Returns will be credited to your account after TDS deduction. 

For capital gains, a TRC can save you immediate tax on mutual-fund gains. Always remember to submit your TRC (and Form 10F) to avoid unnecessary TDS.

Dividend Income

Dividends from Indian companies are taxed in India, but the India-UAE DTAA offers a significant discount. Instead of the standard 20% (plus cess), a UAE resident with a TRC pays only a 10% flat tax.

Interest Income

The India-UAE DTAA provides favourable tax treatment on interest income for NRIs:

  • NRE Account: This interest is already tax-free in India.

  • NRO Account: This interest is taxable. Without the treaty, you could be taxed at 30% (plus cess). With the beneficial provisions of the India-UAE DTAA, you pay only 12.5% in India.

Rental Income

NRI landowners with rental income in India are subject to tax. Tenants may deduct TDS from rent payments.

A TRC doesn't drastically change TDS deduction, which is based on income and Indian tax laws. 

However, a TRC allows taxation under the India-UAE DTAA, potentially lowering overall tax liability when filing the return. Specific TDS rates and claims are subject to Indian tax regulations.

Taxation of Income for UAE NRIs on Different Categories

For NRIs in the UAE earning investment income from India, tax is usually deducted at source (TDS) often at high rates. Having a valid Tax Residency Certificate (TRC) under the India-UAE DTAA allows NRIs to significantly reduce or even eliminate TDS in key cases (like mutual funds), improving cash flow by preventing funds from being locked in the tax system while awaiting refunds. This control over TDS deduction is one of the main financial advantages of the DTAA for NRIs.

Type of Income
Tax & TDS Treatment WITHOUT TRC
Tax & TDS Treatment WITH TRC & Form 10F
How Tax is Paid: TDS vs. ITR

Capital Gains (Mutual Funds)

High TDS is deducted by the AMC (e.g., 20% on LTCG).

NRI must claim refund via ITR.

Zero TDS should be deducted if docs are submitted in advance. Income is tax-exempt in India.

Tax is collected via TDS. A TRC is crucial to prevent this deduction and avoid the refund process.

Capital Gains

(Listed Shares)

Taxable in India.

NRI is responsible for paying tax directly.

Taxable in India. The DTAA does not provide an exemption.

No TDS on listed shares sale. Tax must be paid by the NRI via Advance Tax / ITR filing.

Dividend Income

TDS is deducted at 20% (+ cess) by the paying company.

TDS is deducted at a lower rate of 10% by the paying company.

Tax is collected via TDS. A TRC effectively halves the TDS rate at the source.

Interest Income (NRO)

TDS is deducted at 30% (+ cess) by the bank.

TDS is deducted at a lower rate of 12.5% by the bank.

Tax is collected via TDS. A TRC significantly reduces the upfront tax deduction.

Rental Income

Taxable in India. TDS at 31.2% is deducted by the tenant (if rent > ₹2.4L/yr).

Same as without TRC. The DTAA offers no benefit here.

Tax is collected via TDS. Final tax liability is determined during ITR filing.

Salary

(For services in India)

Taxable in India. TDS is deducted by the employer as per slab rates.

Same as without TRC. The DTAA offers no benefit here.

Tax is collected via TDS.

Pension

(From Indian source)

Taxable in India. TDS is deducted by the paying entity.

Same as without TRC. The DTAA offers no benefit here.

Tax is collected via TDS.

Other Income Considerations under the India UAE DTAA

  • Salary Income (Article 15): Salary earned for services performed in the UAE is taxable only in the UAE. Salary for services rendered in India may be taxed in India.

  • Pension Income (Article 18): Pensions received from an Indian source by a UAE resident may be taxed in India.

  • Business Income (Article 7): Business profits of a UAE resident are taxable in India only if they have a Permanent Establishment (PE) in India, and the tax is limited to the profits attributable to that PE.

Importance of UAE Tax Residency for Tax Efficiency

If you’re a UAE-based NRI, the India–UAE DTAA can significantly improve your tax planning—but only with the right documents.

Key Investments:
  • Mutual Funds: Capital gains are tax-free in India.

  • NRE Deposits & Bonds: Interest is exempt from Indian tax.

Key Requirements:
  • Obtain a UAE Tax Residency Certificate (TRC) by staying 183+ days in the UAE, issued by the Federal Tax Authority.

  • File Form 10F in India to claim DTAA benefits.

With a TRC, you get lower tax rates and exemptions. Without it, you face higher withholding tax in India.

Frequently Asked Questions (FAQs)

1. Is the India-UAE DTAA beneficial for all my Indian income?
The India-UAE DTAA is highly beneficial for specific incomes like capital gains from mutual funds. However, the rules for DTAA UAE India personal tax still allow India to tax incomes like rent and salaries earned in India.

2. Do I still need to file an income tax return in India? 

Yes, most likely. Filing an ITR is often necessary to claim benefits under the India-UAE DTAA, report your incomes, and claim refunds, which is a key part of compliance for UAE NRI taxation.

3. What happens if I am a tax resident of both India and the UAE in the same year? 

This is rare, but if it happens, the India-UAE DTAA has "tie-breaker" rules to determine a single country of residence for tax purposes. The rules look at important things such as where someone permanently lives, where their interests are centered and where they regularly live.


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