Zero tax in the UAE does not mean zero filing in India

The UAE does not tax your salary. India still taxes what you earn in India.

Those two facts do not conflict, and many NRIs in the UAE only find this out when a bank deducts tax on NRO interest, a tenant deducts it on rent, or a buyer deducts it on a property sale.

Which income India taxes

For an NRI, India taxes income earned in India or received in India. Your UAE salary is outside that net. These are inside it:

• Interest on NRO accounts and Indian fixed deposits
• Rent from property in India
• Capital gains on Indian property, shares and mutual funds
• Business or professional income from India

Interest on NRE accounts is generally exempt, which is why the type of account matters.

The rule that catches UAE NRIs

Because the UAE has no personal income tax, a special rule can apply to Indian citizens living there. If your Indian income is above Rs 15 lakh in a year, and you are not liable to tax in any other country, you can be treated as a deemed resident of India. In most cases this makes you a Resident but Not Ordinarily Resident (RNOR), which changes how your return is prepared.

When you must file

You need to file an Indian return if your Indian income crosses the basic exemption limit for the year. But the limit is not the only trigger. File even below it if:

• Tax was deducted at source and you want a refund
• You want to carry forward a capital loss
• You sold property or shares and are claiming an exemption on the gain
• You want to claim relief under the India-UAE tax treaty

TDS on NRI income is usually deducted at high flat rates. Filing is often the only way to get the excess back.

Before you file

• Count your days in India for the financial year, and for the years before it
• List every Indian income source, including small interest credits
• Match your TDS credits with Form 26AS and the Annual Information Statement
• Keep the paperwork for any money you send out of India. Remittances need the foreign-remittance forms (formerly 15CA/15CB)
• Choose the right ITR form. A wrong form is a common reason for defective-return notices

Do you know your residential status for this financial year, or are you assuming it?

This article is for general information, based on the provisions applicable at the time of writing, and is not professional advice. Tax rules and limits change, and the right answer depends on your specific facts. Please consult a qualified Chartered Accountant before acting. Published by M Karkara & Co., Chartered Accountants, Chandigarh, in line with ICAI Regulation 190A.