Income Tax for NRIs in the UAE: NRI Status & Income Tax

The Indian Government recently made changes to the Income Tax Act, whereby they altered the Non-Resident Indians (NRIs) status and added conditions to determine whether NRI’s living in the UAE should pay Indian income tax. This has led to widespread confusion on the matter of income tax for NRIs in the UAE.

To be able to properly comprehend the impact of these changes, it is best to first understand more about the new NRI tax stipulations.

THE NRI STATUS AND INCOME TAX

According to the new terms, the NRI status will now be applicable only on citizens of India who:

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

This includes resident NRIs in the UAE and other countries across the globe. Previously, this out-of-country stay period was 182 days. Now this number has been increased to 240 days, so you will be categorised as an NRI if you have been a tax-paying resident of another country for at least 8 months.

NRI working overseas — *To hold the NRI status, one must be a tax-paying resident of another country and living abroad for at least 240 days*

Non-Resident Indians (NRIs) are exempt from income tax on their global income, but liable to pay taxes on their local income. Income tax for NRIs in the UAE will also take the same course.

However, people who are not legal residents of any country, will be considered tax-paying residents of India even if they annually spend more than 240 days abroad. In this case all their global and local income will be taxed.

So, if you have lived two months in Dubai, 30 days in Europe and 6 weeks in the US – just to be categorised as an NRI, it wouldn’t work. You HAVE to be a resident of a country to be exempted from income tax on their global income.

WHAT ARE THE IMPLICATIONS OF INCOME TAX FOR NRIS IN THE UAE

The good news for Indian expats in the UAE is that their finances will not take a hit from these latest tax changes proposed in the Indian Budget. Indian residents of the UAE are governed by the India-UAE Double Taxation Avoidance Agreements (DTAA).

According to the DTAA, if you are a resident of the UAE (which you are once you spend 180 days in the country) you are exempt from income tax back in India, for as long as you complete the 240-day period abroad.

NRI family in the UAE — *Salaried NRIs in the UAE need not worry about the latest stipulations of NRI tax in India*

So, it is safe to say that these latest changes do not impact the income tax for NRIs in the UAE. As a salary-earning NRI, all you need to do is prove your active UAE resident status to gain tax exemption on your global income.

This applies even when you have to frequently fly back and forth between India and the UAE. If you tend to travel regularly from the UAE to India and vice versa, the Adhaar Card can prove extremely beneficial to you. Since the Indian Government allowed expats to apply for Adhaar Card online, the process to get one is now simple and hassle-free.

That’s all we have for you now. The Indian budget 2020-21 has come with a number of debatable proposals. An amendment was also proposed for new duty-free quota rules for India-bound passengers. While the finer details of this proposal are yet to be finalised, it will most likely impact the travel norms of passengers flying to India from Dubai Airport and other terminals in the country.

For those of you who intend to fly to India from Dubai, make sure your luggage does not carry any of the banned items at DXB Airport. Should you find yourself on a long transit in Dubai, take the time to explore all the fun activities at Dubai Airport.

For more news and updates on life for expats in the UAE, stay tuned to MyBayut.