Decoding dual taxation: What NRIs need to know for better tax efficiency
Subscribe to enjoy similar stories. Citizens of India residing abroad are classified as non-residents (NR) under the Income Tax Act, 1961 (the Act) based on their physical stay in India. Lately, there has been a surge in tax compliance among non-resident Indians, including filing of tax returns.
This trend has been driven by changes in tax residency conditions and a heightened focus on global transparency. NRIs are now more diligent in reporting their Indian-sourced income and claiming tax reliefs under the act and the Double Taxation Avoidance Agreement (DTAA). When NRIs become residents, they need to make disclosure of their foreign assets.
The total NRI tax return filings rose from 4.9 lakh in FY2019-20 to 7.2 lakh in FY2023-24, reflecting an increase of 47%. Double taxation can occur when an NRI's income is taxed both in India and their country of residence. DTAAs are bilateral treaties that outline each country’s rights to tax specific income streams.
These help resolve conflicts and ensure fairness in taxation. These agreements aim to: India has comprehensive DTAAs with 96 countries, which help NRIs mitigate their overall tax liabilities. Also Read: Budget 2025: The NRI’s wish list 1.
Tax exemptions: Certain incomes are taxed only in the source country. For example, salary earned by an NRI may not be taxed in India, subject to specific conditions (e.g., Article 15 of the India-Singapore DTAA). 2.
Tax credit mechanisms: DTAAs allow NRIs to offset taxes paid in one country against their liabilities in another to avoid double taxation. (e.g., Article 25 of the India-Singapore DTAA). 3.
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