Income Tax and NRIs in the UAE


Indian law stipulates that the citizens of the nation who are earning income per month pay an income tax. The tax rates differ according to the annual income slab. There are also many changes that the government will bring to the different tax rules and recently some changes were brought to the Income Tax Act that caused a lot of confusion among the Non-Resident Indians (NRIs).

The recent changes made by the Indian Government changed the status of NRIs. They also added some conditions which determine whether an NRI who is living in the UAE needs to pay Indian income tax. As always, it has led to some confusion among the NRIs in UAE, whether or not they need to pay income tax in India.

Well, if you need to understand everything regarding this matter, it would be better if everything regarding the new NRI tax rules are made clear. Let us get started then:

1. The NRI Status

Anyone who is staying out of India is considered an NRI. According to the new conditions, a citizen of India to be considered a Non-Resident Indian should:

  • Stay out of the country for more than 240 days
  • Be legal, bona fide residents of another country

The new NRI status will include Indians staying in all parts of the world, including the UAE. Up and until this new condition, the minimum number of days an Indian citizen should have stayed out of the country to be termed an NRI was 182 days or 6 months. According to the new changes, an Indian citizen will only be considered an NRI if he has been residing in another country and paying the tax of the said country for a minimum of 240 days, or 8 months.

2. Income Tax

Those who qualify the above conditions and be considered an NRI will not need to pay the income tax on the global income they earn. However, if they are earning any local income, they are liable to pay taxes on the same. This is applicable for the NRI residents of the UAE too.

Another important point to note is that to be considered as an NRI, one should be a legal resident of a country. If they are not legal residents, then they are considered as tax-paying residents of India. So, irrespective of whether they stay 240 days abroad, they won’t be an NRI. They are also liable to pay taxes for their global and local income.

So, it wouldn’t be possible for you to be considered as an NRI if you have stayed 90 days in the UAE, 60 days in the US and 90 days in Europe, even though you have completed 240 days abroad. If you are to be exempted from paying tax on your global income, you should be a legal resident of a country.

3. Implications of Income Tax for NRIs in the UAE

Do these new rules have a say on your finances? The happy news is that with you being an Indian citizen residing in the UAE, the new tax regulations put forward in the Indian Budget will not have much of a say in your finances. Thanks to the India-UAE Double Taxation Avoidance Agreements (DTAA), you will be exempt from paying double taxes.

How does then DTAA work? You become a resident of the UAE once you have stayed in the country for 180 days. It means that you are liable to pay taxes in the UAE but exempted from paying in India. However, keep in mind that you need to complete 240 days in UAE to be considered an NRI.

The latest modifications to the Income Tax rules in India regarding NRIs will not have an adverse effect on your savings or financials. As long as you are able to prove your active UAE resident status, you will be exempted from paying income tax in India on your global income.

This is all there is to know about the new Income Tax rules in India and their implications.