Taxation of NRIs: Income from Abroad, Double Taxation Relief & Indian Filings
Introduction
Non-Resident Indians (NRIs) often juggle between multiple tax jurisdictions. If you earn abroad but maintain ties to India, the question arises—do you need to pay tax in India as well? The good news is that India’s tax system provides clarity through residential status rules, Double Taxation Avoidance Agreements (DTAAs), and filing procedures like Form 67.
In this blog, we’ll simplify how NRIs are taxed in India, how to avoid double taxation, and the compliance steps every NRI should know.
Residential Status: The Key to NRI Taxation
Taxation depends not on nationality but on residential status under the Income Tax Act.
- Resident: Stays in India for 182 days or more in a financial year.
- Resident but Not Ordinarily Resident (RNOR): Resident in India but limited stay in past years.
- Non-Resident (NRI): Stays less than 182 days (with conditions).
👉 Only residents are taxed on global income, while NRIs are taxed only on income earned or received in India.
Income from Abroad: When is it Taxable in India?
- Salary income abroad: Not taxable if services are rendered outside India by an NRI.
- Business/professional income: Taxable only if business is controlled from India.
- Investment income abroad (dividends, capital gains): Exempt for NRIs unless received in India.
- Indian income (rent, interest, capital gains on Indian shares/property): Always taxable in India.
Double Taxation Relief: DTAA Explained
The Double Taxation Avoidance Agreement (DTAA) prevents you from paying tax twice on the same income.
Relief Methods:
- Exemption Method: Income taxed in one country is exempt in the other.
- Tax Credit Method: Tax paid abroad is adjusted against Indian tax liability.
👉 India has DTAA with 90+ countries including the USA, UK, UAE, Canada, and Australia.
Form 67: Claiming Foreign Tax Credit
To claim DTAA benefits:
- File Form 67 online before filing your ITR.
- Provide details of foreign income and tax paid abroad.
- Upload proof like tax slips or certificates from foreign employers.
⚠️ Missing Form 67 means you may lose out on foreign tax credit, even if DTAA applies.
Reverse Credit for Global Income
- If an NRI later becomes a Resident in India, their global income becomes taxable.
- Taxes already paid abroad can be claimed as credit via DTAA, subject to conditions.
- Example: A software professional returning from the US in 2025 must include salary from April–June 2025 (earned abroad) in Indian filings but can claim tax credit via Form 67.
Case Study: NRI Consultant in UAE
Scenario:
- An NRI from Kolhapur works in Dubai, earning AED 2,00,000 per year.
- He also owns property in Pune earning ₹6 lakh rental income annually.
Tax Treatment:
- Dubai salary not taxable in India (as services rendered abroad).
- Indian rental income taxable in India at slab rates.
- If he later shifts to India permanently, UAE salary for part of the year will also be taxed in India, with DTAA relief.
Best Practices for NRI Tax Compliance
- ✅ Determine residential status every year.
- ✅ Report all Indian income (interest, rent, dividends, capital gains).
- ✅ File Form 67 to claim foreign tax credits.
- ✅ Use DTAA provisions to avoid double taxation.
- ✅ Maintain documentation of foreign tax paid for audit and verification.
FAQs
Q1. Do NRIs need to file ITR in India?
Yes, if Indian income exceeds ₹2.5 lakh in a financial year.
Q2. Is foreign salary taxable in India?
Not for NRIs. It becomes taxable only if you qualify as a Resident.
Q3. How do NRIs avoid double taxation?
By using DTAA provisions and filing Form 67 for foreign tax credits.
Q4. Can NRIs claim deductions like Section 80C?
Yes, for Indian investments like ELSS, NPS, or life insurance premiums.
Q5. What if I fail to disclose foreign income?
It may trigger penalties under the Black Money Act, 2015.
Conclusion
NRI taxation in India is all about residential status, correct reporting, and using DTAA relief effectively. By filing Form 67 and planning income properly, NRIs can avoid double taxation and stay compliant.
👉 At Verotus LLP, we specialize in NRI taxation, DTAA advisory, and global income planning. If you’re an NRI with income in India or abroad, our experts can guide you on compliance and tax optimization.
📞 Contact us today to simplify your NRI tax filings.
