“Synopsis”
Non-Resident Indians (NRIs) often earn income both in India and abroad. This can sometimes lead to double taxation, where the same income is taxed in both countries. Fortunately, India has signed Double Taxation Avoidance Agreements (DTAAs) with many countries to protect its global citizens. This blog explains how DTAA works, how to claim benefits, and how NRIs can avoid paying tax twice legally and efficiently under Indian laws.
Understanding Double Taxation
Double taxation occurs when:
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Income is taxed in the country where it’s earned.
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And again in the country of residence (if worldwide income is taxed there).
For example, if an NRI earns rental income in India and also pays tax on global income in the U.S., the same rental income might be taxed twice — unless covered under a DTAA.
What is DTAA?
DTAA (Double Taxation Avoidance Agreement) is a treaty between two countries to ensure that taxpayers do not pay tax on the same income in both countries. India has DTAAs with over 90 countries, including the USA, UK, UAE, Canada, and Australia.
Types of Relief Under DTAA
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Exemption Method:
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Income is taxed only in one country.
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Example: If taxed in India, then exempted in the UAE.
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Tax Credit Method:
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Income is taxed in both countries.
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But you can claim credit in your resident country for tax paid in the source country.
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How Can NRIs Benefit From DTAA?
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Avoid Paying Tax Twice:
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Prevents double taxation on income like interest, dividends, salary, and capital gains.
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Reduced TDS Rates:
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DTAAs often allow lower TDS (Tax Deducted at Source) on interest or dividends. For example:
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Indian TDS = 30%
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Under DTAA = May drop to 10–15%
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Refund Claims:
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NRIs can claim refunds if excess TDS was deducted and they’re eligible for DTAA benefit.
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Income Types Covered Under DTAA
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Salary income
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House property income
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Capital gains
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Business profits
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Interest from NRO accounts
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Dividends and royalties
How to Claim DTAA Benefits in India?
To avail benefits under DTAA, NRIs must:
Submit a Tax Residency Certificate (TRC) from their resident country
Fill and submit Form 10F
Declare PAN in India
Provide self-declaration of eligibility
These documents are often required by banks or entities deducting TDS.
Example Scenario
Let’s say:
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An NRI living in the UK earns ₹10 lakhs from an Indian FD.
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Indian bank deducts TDS @30% (₹3 lakhs).
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But under India-UK DTAA, the rate is only 15%.
So, the NRI can:
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File ITR in India and claim refund of excess ₹1.5 lakhs
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Or adjust this tax paid while filing UK tax return.
Things to Keep in Mind
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DTAA doesn’t mean tax-free income it avoids duplicate tax.
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Tax treatment varies based on:
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Country of residence
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Type of income
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Local laws
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Always maintain documentation and consult a tax expert for large transactions.
Popular Countries with DTAA with India
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USA
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UK
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UAE
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Canada
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Singapore
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Australia
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Germany
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Netherlands
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New Zealand
Conclusion
DTAAs are powerful tools that allow NRIs to save taxes legally while staying compliant in both countries. By understanding the provisions and filing the right paperwork, NRIs can avoid paying tax twice on the same income. Whether you are an NRI professional, investor, or business owner it’s essential to make use of India’s DTAA network for smart and efficient tax planning.
