Is an NRI taxable on the income he receives, in India and in his country of resident? What is the role of the Double Taxation Avoidance Agreement (DTAA) here?

It is very often the case that non-resident Indians (NRI) live abroad but also earn income in India. In such cases, it is possible that the income earned in India would attract tax in India as well as in the country of the NRI’s residence. An NRI’s income taxability in India depends on his residential status for the year. If the status is ‘resident,’ then the global income would be taxable in India. If the residential status is ‘NRI,’ then only the income which is earned or accrued in India is taxable in India.
This means that they would have to pay tax twice on the same income. However, to avoid doing so, there is something called the Double Tax Avoidance Agreement (DTAA) that NRIs can benefit from.

The Double Tax Avoidance Agreement is a treaty that is signed between two countries. The agreement enables NRIs to take relief from having to pay taxes multiple times. DTAA does not allow the NRI to completely avoid taxes, but it makes sure that the NRI can avoid paying higher taxes in both countries. DTAA also reduces the instances of tax evasion.

Income types under DTAA
Under the Double Tax Avoidance Agreement, NRIs don’t have to pay tax two times on the following income earned from:

  • Services provided in India
  • Salary received in India
  • House property located in India
  • Capital gains on transfer of assets in India
  • Fixed deposits in India
  • Savings bank account in India

When income from these sources is taxable in the NRI’s country of residence as well, they can avoid paying taxes on it in India by availing the benefits of DTAA.



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