September 30, 2023

Are you a Non-Resident Indian (NRI) who earns revenue in India, then you must know in regards to the Double Tax Avoidance Settlement (DTAA) to keep away from paying double taxes on the identical revenue. Let’s say if you’re a resident of the UK having rental revenue in India, in such occasion your rental revenue is taxable in each international locations i.e., in India as it’s the supply nation. Being a resident of the UK, your rental revenue can be taxable within the UK. Most international locations levy revenue tax on the home and overseas revenue of their residents and the home revenue of their non-residents. Resulting from this the NRIs typically find yourself paying twin taxes in each the supply nation and resident nation. With a purpose to overcome this challenge Double Tax Avoidance Settlement (DTAA) was launched.

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What’s DTAA?

DTAA is a double tax treaty between two or extra international locations to keep away from levying taxes twice on the identical revenue. India has Double Taxation Avoidance Settlement (DTAA) with 88 international locations, however presently 85 have been in drive.

Discuss with the revenue tax web site hooked up to know extra in regards to the DTAA agreements between India and different international locations.  

How NRI is benefited from DTAA? 

There are 2 methods by which NRIs can get aid from double taxation;

Tax Credit score Technique: Tax credit score might be claimed solely within the nation of residence. For instance, Mr. Ram who’s an Indian resident earns revenue from a US-based agency for rendering consultancy providers. On this case, the supply nation is the US and the resident nation is India. Whereas computing the tax legal responsibility on this Revenue Mr. Ram can avail tax credit score for the tax that he has paid within the US to the extent of tax payable on this overseas revenue in India.

Tax Exemption Technique: Tax exemption might be claimed in any one of many 2 international locations. For instance, the dividend revenue is mostly taxed within the supply nation. If an Indian resident earns dividend revenue from an Indian firm, then it’s taxed in India. If he earns the dividend revenue from a overseas firm, then the dividend revenue is taxed within the overseas nation and he can avail the tax exemption in India.  

Additionally Learn: NRI Taxation – How is the Revenue taxed?

Revenue varieties beneath DTAA:

Beneath the Double Tax Avoidance Settlement, NRIs don’t must pay tax twice on the next revenue earned:

  • Wage Revenue earned in India

If an NRI receives wage revenue from India or if he earns revenue by rendering providers in India then he’s liable to pay taxes in India (Supply Nation).

  • Curiosity Revenue on NRO Accounts in India:

Many of the NRIs open NRO accounts to hold out their Indian transactions in rupees. The curiosity earned on the NRO account is taxable within the fingers of the account holder and 30% TDS can be deducted from such curiosity revenue in India.

  • Capital Beneficial properties from the switch of belongings in India;

Capital acquire arising from the sale of capital belongings in India is liable to tax in India. This contains Movable capital belongings like Shares, bonds, and so forth, and Immovable capital belongings like home and so forth… In case an NRI sells his home property in India then the client has to deduct TDS at 20%.

  • Maturity Proceeds from Insurance coverage insurance policies;

If the NRI has invested in ULIPs / Endowment / A refund coverage then the insurance coverage firm deducts TDS on the maturity proceeds. With a purpose to declare the TDS the NRI ought to report such revenue to the tax division by ITR submitting.

  • Dividend revenue from Investments:

If an NRI earns dividend revenue from Fairness shares or Fairness mutual funds then 20% TDS is relevant within the case of Particular person NRI’s.

If revenue from these sources is taxable within the NRI’s nation of residence, he can keep away from paying taxes on it in India by availing the advantages of DTAA.

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How NRI can avail of the DTAA Advantages?       

  • Perceive the DTAA settlement between the supply nation and nation of residence.
  • Apply any one of many two strategies ie., the Tax Credit score Technique or Tax Exemption Technique to keep away from double taxation.
  • The  taxpayer should submit the under paperwork and every other required info as prescribed within the DTAA to the payer of the revenue;
  1. Tax Residency Certificates (TRC) obtained from the Authorities of the house nation to find out the NRI residential standing. Necessary particulars to be talked about within the TRC are:
  • Identify of the assessee
  • Standing (particular person, firm, agency, and so forth.) of the assessee
  • Nationality of the assessee
  • Assessee’s tax identification quantity
  • Interval for which the residential standing as talked about in TRC is relevant
  • Deal with of the applicant (exterior India) for the interval for which TRC is relevant

A TRC containing the above particulars ought to be duly verified by the Authorities of the Nation or the Specified Territory of which the NRI claims to be a resident for tax functions. A TRC is often legitimate for one monetary yr and no different doc in lieu of TRC is taken into account for availing DTAA advantages. Subsequently, it’s obligatory to submit TRC yearly with the intention to avail DTAA profit to keep away from any hassles.

  1. You will need to observe that, if any, of the small print talked about above in level no. 1 to six will not be out there within the TRC, the NRI has to moreover present Kind 10F (as offered within the Act) to the payer of revenue together with the TRC.Kind 10F to be stuffed with required info such because the applicant’s nationality, tax identification quantity, tackle, and interval of keep. After verifying the accuracy of the data, the particular person must signal on the finish to make the shape legitimate.
  2. Self-attested copy of Passport and Visa
  3. Indemnity-cum-declaration (in case of Banks)
  4. OCI card (if relevant)
  5. Self-attested copy of PAN Card (if out there)

NRI can not keep away from tax utterly by DTAA, he can simply keep away from paying double taxes in each international locations. DTAA reduces the tax burden and encourages the NRI to discover world funding alternatives and then again, it would additionally cut back the situations of tax evasion.


This text shouldn’t be construed as funding recommendation, please seek the advice of your Funding Adviser earlier than making any sound funding resolution.

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Additionally Learn: A Full Information for NRI Mutual Funds Funding in India