NRI tax filing from the GCC and abroad

The Indian diaspora in the Gulf is among the largest in the world, and a great many of those residents keep a financial foothold in India — a flat let out in their home city, a portfolio of shares and mutual funds, fixed deposits, or property inherited from family. Each of those can create an Indian tax obligation that does not disappear because the person now lives and earns abroad. This note explains, in plain terms, how Indian tax applies to a non-resident Indian (NRI), with the Gulf reader particularly in mind.

The single most important idea is that almost everything turns on one question answered first: what is your residential status under Indian tax law? Get that wrong and the rest of the return is built on sand.

Residential status under section 6 — the question that drives everything

Indian income tax does not look at your passport or your visa. It looks at how many days you were physically in India during the financial year (1 April to 31 March), under section 6 of the Income-tax Act, 1961. Broadly, you are a resident if you are in India for 182 days or more in the year, or for 60 days or more in the year combined with 365 days or more across the preceding four years. Fall below those thresholds and you are a non-resident for the year.

There are two refinements that catch people out, and both matter to NRIs in the Gulf:

• Deemed residency — section 6(1A). An Indian citizen with Indian-sourced income above a set threshold who is not liable to tax in any other country by reason of domicile or residence can be deemed a resident of India, even without setting foot in the country. This provision was aimed squarely at the "stateless" tax position that a zero-tax jurisdiction can create, so a Gulf-based NRI should check it deliberately rather than assume non-residence.
• Resident but Not Ordinarily Resident (R-NOR). A transitional status, often relevant in the year a person returns to India for good. An R-NOR is broadly taxed like a non-resident on foreign income, which can give a returning NRI a window before worldwide income becomes taxable in India.

What Indian income is taxable for an NRI

A non-resident is taxed in India only on income that is received in India or that accrues or arises in India — not on worldwide income. So salary earned and received in Dubai, Riyadh, Doha, or Abu Dhabi is outside the Indian net. What remains taxable is Indian-source income, which typically includes:

• Rent from property situated in India.
• Capital gains on the sale of Indian assets — property, shares, mutual fund units.
• Interest on NRO deposits and on most Indian bank balances (interest on NRE and FCNR deposits is generally exempt while you remain a non-resident).
• Dividends from Indian companies.
• Any income from a business or profession carried on in India.

If your total taxable Indian income exceeds the basic exemption limit, you are required to file an Indian return. Even when it does not, filing is often worthwhile to recover tax that has been deducted at source at a higher rate than your actual liability.

DTAA relief and the India–UAE position

A Double Taxation Avoidance Agreement (DTAA) is a treaty between two countries that decides which of them may tax a given category of income, and provides relief so the same income is not taxed twice. India has a wide network of these treaties, including a comprehensive one with the UAE.

For most Gulf residents, the practical points are these. To claim treaty benefits you generally need a Tax Residency Certificate (TRC) from your country of residence, supported by the prescribed Indian declaration. The treaty can reduce the rate of tax on certain income — interest, dividends, and royalties are common examples — and it sets the rules for where capital gains and other items are taxed. It does not, however, sweep all Indian-source income out of the Indian net automatically; the relief is read item by item, against the relevant article of the treaty.

TDS on NRO income and the Form 15CA / 15CB workflow

Payments to a non-resident attract tax deduction at source under section 195, often at rates higher than a resident would face on the same income. Interest credited to an NRO account, for instance, is typically subject to TDS at a higher rate, with the treaty rate available where a valid TRC is on file. Because the deduction is frequently more than the eventual liability, filing an Indian return to claim the refund is a routine part of an NRI's year.

When money is then remitted abroad, a two-form certification process applies:

1. Form 15CA — a declaration filed by the remitter on the income-tax portal, stating the nature of the remittance and the tax position.
2. Form 15CB — a certificate from a chartered accountant, required in most cases, confirming the nature of the payment, the applicability of the treaty, and that the correct tax has been deducted or paid before the funds leave the country.

The bank will not process the outward remittance from an NRO account without these in place. The two forms, the underlying TDS, and the eventual return together make up the repatriation paperwork.

Selling Indian property as an NRI

A property sale is where the largest sums, and the most common surprises, arise. When an NRI sells immovable property in India, the buyer is required to deduct TDS under section 195 on the sale consideration — and the rate is materially higher than the 1 per cent that applies when the seller is a resident. The deduction is on the gross consideration unless the seller obtains a certificate from the Assessing Officer authorising deduction at a lower rate based on the actual capital gain.

The mechanics that matter:

• The taxable amount is the capital gain, not the sale price — the indexed cost of acquisition and improvement, and eligible expenses, are deducted. Long-term gains (on property held beyond the prescribed period) are taxed differently from short-term gains.
• Because TDS is deducted on the gross consideration, it usually exceeds the tax on the gain. A lower-deduction certificate obtained before completion can avoid a large sum being locked up; otherwise the excess is recovered by filing the return.
• Reinvestment reliefs — for example, reinvesting the gain in another Indian residential property or in specified bonds within the prescribed time — can reduce or defer the tax, subject to conditions.
• Repatriating the net proceeds abroad then runs through the NRO account and the Form 15CA / 15CB process described above, within the annual remittance limit.

Which ITR to file

For most NRIs, the choice is between two forms. An NRI whose Indian income is from salary, house property, capital gains, and other sources — but with no income from a business or profession in India — files ITR-2. An NRI who carries on a business or profession in India files ITR-3. Having capital gains, including from a property or share sale, does not by itself move you to ITR-3; it is the presence of business or professional income that does.

Where this connects to the rest of your affairs

NRI taxation rarely sits on its own. It touches exchange control on every repatriation, the treatment of inherited assets, and, for those running or investing in Indian ventures, the inbound-investment rules. The cross-border and exchange-control side is covered under our FEMA & international taxation practice, and the broader set of services for non-residents and founders building across borders sits under startup & NRI services.

The through-line is the same one we began with: establish your residential status for the year first, identify which income India may tax, apply the treaty where it helps, and keep the repatriation paperwork clean. An NRI who does those four things in order rarely has an unpleasant surprise at the year-end.

This article is for educational purposes and is not professional advice. Consult a qualified professional for advice on your specific situation.