Income tax filing is a challenging and critical process for NRIs. UAE-based NRIs need to understand the tax laws in both the UAE and India to comply with regulations and avoid double taxation. Taking benefits of the India-UAE Double Taxation Avoidance Agreement (DTAA) to save tax, seeking professional help, filing returns accurately within the deadline, and keeping detailed records can ensure compliance and optimize tax liability.

Let us look at the NRI tax filing requirements in UAE and India.

NRI Tax Filing Requirements in UAE

The UAE does not levy a personal income tax on individuals, including NRIs. Hence, NRIs living in the UAE do not need to file personal income tax returns there. However, NRIs are subjected to value-added tax and corporate tax if they are involved in a business operation in the UAE. In that case, NRIs need to comply with corporate tax filings and VAT regulations.

NRI Tax Filing Requirements in India

UAE-based NRIs are taxed on income earned or accrued in India and must file an income tax return if their gross income exceeds the basic exemption limit of INR 2.5 Lakhs. You must also file an IT return to claim a refund of TDS/TCS deposited on your behalf, if your tax liability is lower than the amount already collected by the IT authorities. The process involves determining NRI status, choosing the right ITR form (ITR-2 or ITR-3), utilizing DTAA benefits, and ensuring timely and accurate return submission.

Determining NRI Status

As per NRI tax residency rules in India, you are considered an NRI if you satisfy both of the following conditions:

1. You should be in India for a period not more than 182 days during the previous year,

and,

2. You should be in India for a period of not more than 60 days during the previous year and not more than 365 days during the 4 years immediately preceding the previous year.

Additionally, if you visit India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. Similar concession is provided if you leave India in any previous year as a crew member or for the purpose of employment outside India.

Understanding Tax Limits, Deductions and Exemptions

1. Basic Tax Exemption Limits in India

Taxable Indian income for NRIs is exempt up to INR 2.5 Lakhs. If the taxable income is above this threshold, income tax would be payable as per the applicable slab rate. NRIs can utilize the benefits of DTAA between India and UAE along with claiming deductions and exemptions under various sections of the Income Tax Act, of 1961. The due date for filing tax returns is typically July 31st of the assessment year.

2. Deductions and Exemptions:

Here are some of the key deductions and exemptions available:

  • Section 80C: Investments like Equity Linked Savings Scheme, life insurance premiums, home loan principal repayment, etc, can be claimed as a deduction for up to INR 1,50,000.
  • Section 80D: If NRIs have taken health insurance in India for senior citizen parents, spouses, children, or themselves, the deduction can be claimed for up to a maximum of INR 1,00,000.
  • Section 80G: Deduction for donation to charitable institutions or funds
  • Section 80TTA: Deduction of up to INR 10,000 on NRO savings account interest
  • Tax exemption on interest from FCNR/NRE accounts
  • DTAA benefits: By utilizing India-UAE’s DTAA benefits for various categories of income, such as salary income, business profit, dividend, interest income, pension, income from property, etc, you can get a tax credit and avoid paying tax twice on the same income.

NRI Tax Return Submission in India

Here is a step-by-step guide to NRI tax return filing:

  • Register on the Income Tax e-Filing Portal by providing your name, PAN, and date of birth.
  • Choose the appropriate ITR form (ITR 2 for NRIs without business income in India, and ITR 3 for NRIs who have business income in India)
  • Complete the ITR form by providing all the relevant details, such as personal information, income, TDS/TCS/Advance Tax, deductions, and exemptions applicable.
  • Calculate tax liability (using specialized tax filing software and online tools) and review applicable deductions and exemptions.
  • Pay due taxes, if any, via the e-payment facility online.
  • Verification is the last step in reviewing and ensuring accuracy.
  • Submit the ITR form online and electronically verify your return using Aadhaar OTP, or e-Verify through an Indian bank account.
  • After e-verification, download the acknowledgement (ITR-V) from the portal. Record-keeping is essential.

Documents for NRI tax return submission in India

Keep the below documents handy to file your income tax return:

  • PAN card
  • Passport
  • Form 16, Form 16A and Form 26AS
  • Bank account and investment details
  • Information on foreign assets
  • Rent receipts
  • Form 67 to claim DTAA benefits
  • Details of property in India
  • TDS certificate
  • Tax payment receipt and additional documents, if any.

Note: Consider consulting with NRI tax advisory services, who specialize in NRI tax return planning and filing to ensure compliance and optimize your tax liability.

Conclusion

Understanding the NRI tax filing requirements in UAE and India helps NRIs stay compliant and file returns on time. Accurate assessment and tax planning with the help of professionals, timely filing, and keeping detailed records are crucial for NRIs.

Note: The content of this article has not changed after Budget 2024. The basic tax exemption limit in both the tax regime and DTAA agreements has not changed.