Indians Living in the UAE: Indian Tax Treatment of Each Income Stream

This article explains how India taxes the separate income streams of an Indian citizen who has moved to the UAE: salary, dividends, personal business income, income through a UAE company, continuing Indian-source income, and the reporting that follows a return to India.

The point matters now because the label "NRI" settles very little. Each stream has to be classified by source, place of receipt and residential status, and assessees who rely on a UAE visa or a zero personal tax rate in the UAE often discover the gaps only when a notice arrives. For tax years beginning on or after 1 April 2026, residence is governed by Section 6 of the Income-tax Act, 2025; earlier years remain under the Income-tax Act, 1961.

1. How is residential status decided, and does living in the UAE settle it?

Residential status is determined afresh for every tax year. An individual may be a non-resident in one year and a resident in the next, so a position taken for one year cannot be carried forward by habit.

Three points deserve attention.

• Special rules apply to an Indian citizen who leaves India for employment abroad, and to a citizen or person of Indian origin who visits India. A visitor whose Indian income exceeds Rs 15 lakh must examine the 120-day rule before assuming non-resident status.
• Deemed-residence provisions can reach an Indian citizen who is not liable to tax in any other country by reason of domicile, residence or a similar criterion. The UAE does not levy a general personal income tax, but that fact does not by itself make every Indian citizen there a deemed resident. "Liable to tax" is a statutory and treaty concept and needs its own analysis on the facts.
• A UAE residence visa, an Emirates ID or a lease are supporting documents. None of them decides residence under the Indian statute, which looks at days of presence and the other statutory conditions.

Action: compute the days of stay for each tax year, examine whether the Rs 15 lakh and 120-day rule applies, and record the conclusion on deemed residence on file.

2. When is UAE salary taxable in India?

A non-resident is generally taxable in India only on income received or deemed received in India, or accruing or arising, or deemed to accrue or arise, in India. Foreign income that accrues outside India and is first received outside India is ordinarily outside the Indian tax net unless a deeming provision applies.

For salary, the analysis turns on where the duties are physically performed, the residential status, the contract terms and the place of receipt. The location of the employer is not the test. A non-resident who performs duties in the UAE and first receives pay abroad is ordinarily not taxable in India on that salary.

Two variations change the result.