If you are an Indian living abroad, your income can be exposed to tax in two places at once — in India, where it is earned, and in your country of residence, where you are taxed on your worldwide income. Left unmanaged, the same rupee of rental income, interest, or capital gain can be taxed twice. The tool that prevents this is the Double Taxation Avoidance Agreement (DTAA) — a network of treaties India has signed with more than 90 countries.
But a treaty only helps if you use it correctly. The relief is not automatic; it depends on getting your residential status right, holding the correct documents, and filing the correct forms before the deduction happens. This guide walks through how NRI taxation actually works, how DTAA relief is claimed, and the practical steps that separate a smooth tax year from an unnecessary refund chase.
A note on the law: The new Income-tax Act, 2025 took effect on 1 April 2026, replacing the 1961 Act. It renumbers and simplifies the sections but largely carries forward the substantive rules described below. The residency tests, DTAA mechanism, and capital-gains rates discussed here continue to apply; only some section numbers have changed.
Step 1: Everything Starts With Residential Status
Before any treaty enters the picture, you have to know how India classifies you for the year, because that determines what India can tax in the first place. Residential status is decided year by year, based purely on days spent in India — your passport, visa, or citizenship don’t decide it on their own.
The primary test (182 days). You are a resident for a financial year if you are physically present in India for 182 days or more in that year. Stay fewer than 182 days and you generally remain a Non-Resident Indian (NRI). Both the day of arrival and the day of departure count as days in India.
The secondary test (60/120 days). You can also become a resident if you are in India for 60 days or more in the year and 365 days or more across the four preceding years. For Indian citizens and persons of Indian origin who are visiting India, that 60-day figure is relaxed to 182 days — but only up to a point. If your Indian-source income exceeds ₹15 lakhin the year, the relaxed threshold drops to 120 days, catching high-income NRIs who make long, frequent visits.
Deemed residency. An Indian citizen with Indian-source income above ₹15 lakh who is not liable to tax in any other country can be treated as a deemed resident even without setting foot in India. This provision is aimed squarely at people based in zero-tax jurisdictions such as the UAE, and it typically results in RNOR status (see below) rather than full residency.
RNOR — the useful middle category. Resident but Not Ordinarily Resident status applies to certain returning NRIs and those caught by the 120-day or deemed-residency rules. Its great advantage is that, like an NRI, an RNOR is generally not taxed on foreign income in India — only Indian-source income is taxed. Many returning NRIs can enjoy RNOR for a couple of years, and planning around it can save a meaningful amount of tax.
The practical takeaway: track your days in India deliberately. A handful of extra days, or crossing the ₹15 lakh income line, can flip your status and dramatically change your Indian tax exposure.
Step 2: What India Can Tax for an NRI
The rule for a genuine NRI is clean and favourable: only income that is earned, accrued, or received in India is taxable in India. Your foreign salary, foreign investments, and foreign business income stay outside the Indian net.
Typical Indian-source income that is taxable includes:
- Rent from property situated in India
- Interest on NRO deposits and most Indian bank accounts (note: NRE and FCNR interest is exempt for an NRI, while NRO interest is taxable)
- Dividends from Indian companies
- Capital gains on Indian shares, mutual funds, and property
- Salary for services rendered in India
It’s this Indian-source income that can also be taxed again in your country of residence — and that’s exactly where the DTAA does its work.
Step 3: What the DTAA Does
A DTAA is a bilateral treaty that decides which country gets to tax a particular type of income, and at what maximum rate. It also lays down how relief is given when both countries have a claim. The relevant provisions in Indian law are:
- Section 90 — relief where India has a full DTAA with the other country.
- Section 90A — relief in respect of specified territories with which India has limited agreements.
- Section 91 — unilateral relief where no DTAA exists with the other country, so India still gives credit for foreign tax paid on doubly-taxed income.
(Under the Income-tax Act, 2025 these carry forward with renumbered provisions, but the structure is the same.)
Two methods of relief
DTAAs grant relief in one of two ways:
- Exemption method — the income is taxed in only one of the two countries and exempted in the other.
- Credit method — the income may be taxed in both, but the country of residence gives a credit for the tax already paid in the source country, so you aren’t taxed twice on the same income. India generally follows the credit methodin most of its treaties.
For an NRI, the most common benefit isn’t a full exemption — it’s a lower tax rate on Indian income. For example, interest or dividend income that would otherwise suffer higher withholding in India may be capped at the treaty rate (commonly around 10–15%, depending on the treaty), provided you claim the benefit correctly.
Step 4: How to Actually Claim DTAA Relief
This is where many NRIs lose money — not because the treaty fails them, but because they don’t furnish the right documents before tax is deducted. Three things matter.
1. Tax Residency Certificate (TRC). A TRC is issued by the tax authority of your country of residence (the IRS in the US, HMRC in the UK, and so on) confirming you are a tax resident there for the relevant period. A TRC is mandatory to claim any treaty benefit in India — without it, the relief can simply be denied.
2. Form 10F. If your TRC doesn’t already contain all the particulars India requires — such as your TIN, nationality, status, and address — you must also file Form 10F, now submitted electronically through the Indian income-tax e-filing portal. In practice, most NRIs file Form 10F regardless, because foreign TRCs rarely carry every detail India asks for. Filing it ahead of time is what unlocks the lower TDS rate at source.
3. Form 67 for foreign tax credit. Where you’ve paid tax in India and need to claim credit for it in your home country (or vice versa, for an Indian resident with foreign income), the foreign tax credit is supported by Form 67, filed with the relevant return.
The order of operations matters: obtain the TRC, file Form 10F on the portal, and make sure the payer (your bank, tenant, broker, or buyer) has these on record before they deduct tax. Claiming a reduced rate without the paperwork in place can leave you treated as an “assessee in default” and stuck chasing a refund.
Step 5: TDS — and How the Treaty Brings It Down
For NRIs, India relies heavily on withholding at source (TDS) under Section 195 (renumbered under the 2025 Act). The default rates on NRI income are deliberately high, on the assumption that the NRI may not file a return — which is precisely why DTAA documentation is so valuable in reducing them.
A few headline points on current rates:
- Interest and dividends: default Indian withholding can be high (often 20% or more before cess/surcharge), but the treaty rate — typically around 10–15% — applies once a valid TRC and Form 10F are furnished.
- Listed equity shares and equity mutual funds: after the changes effective 23 July 2024, long-term capital gains are taxed at 12.5% (on gains above ₹1.25 lakh) and short-term gains at 20%.
- Other long-term capital assets, including property: LTCG is now 12.5% without indexation. For property acquired before 23 July 2024, the taxpayer can choose between 12.5% without indexation and the older 20% with indexation — whichever is lower.
- Sale of property by an NRI: the buyer must deduct TDS under Section 195. For long-term gains the rate is 12.5%(plus surcharge and cess) for transfers on or after 23 July 2024; short-term gains are deducted at slab rates up to 30%. Crucially, unlike the 1% TDS that applies to resident sellers, NRI property TDS is computed on a much larger base and at far higher rates.
The lower/NIL deduction certificate. Because TDS on property is often deducted on a large amount while the actual gain is smaller, an NRI can apply to the tax officer for a certificate under Section 197 authorising deduction at a lower or nil rate. For high-value property sales, this single step prevents a large sum from being locked up until you file a return and claim a refund.
A Practical Compliance Checklist for NRIs
- Confirm your residential status for the year before you plan visits or large transactions — count days carefully and watch the ₹15 lakh line.
- Keep a valid PAN — almost every relief, lower TDS rate, and online filing depends on it.
- Obtain your TRC from your country of residence for the relevant period.
- File Form 10F electronically and give it, with the TRC, to every Indian payer before they deduct tax.
- Use the right bank accounts — NRE/FCNR for repatriable, tax-favoured funds; NRO for Indian income — and remember the FEMA requirement to convert resident accounts after becoming an NRI.
- Apply for a Section 197 lower-deduction certificate before selling Indian property.
- File your Indian return even when TDS has been deducted — it’s how you claim treaty rates, reconcile excess TDS, and obtain refunds.
- Claim foreign tax credit (Form 67) in the appropriate country so the same income isn’t effectively taxed twice.
Common Mistakes to Avoid
- Assuming “NRI” is permanent. Status is recalculated every year; long visits or rising Indian income can change it.
- Skipping the TRC or Form 10F. No documents, no treaty rate — and often a higher TDS plus a refund chase.
- Furnishing documents too late. The paperwork must reach the payer before deduction to lower the rate at source.
- Forgetting the Section 197 certificate on property. This is where the largest sums get needlessly withheld.
- Mixing up NRE and NRO tax treatment, or failing to redesignate resident accounts under FEMA.
- Not filing an Indian return because “tax was already deducted,” and thereby forfeiting refunds and treaty benefits.
In Short
For an NRI, the DTAA is a genuine shield against double taxation — but it is a shield you have to pick up. The sequence is what matters: nail down your residential status, understand which of your incomes India can tax, then use the treaty through a valid TRC, an electronically-filed Form 10F, and the right TDS planning (including a Section 197 certificate where property is involved). Done in advance, this keeps your Indian tax to the correct treaty rate and your money in your hands instead of waiting on a refund. Done as an afterthought, it turns a routine year into an expensive one.
This article is for general information and reflects the position as understood in mid-2026, including changes under the Income-tax Act, 2025 and the capital-gains amendments effective 23 July 2024. Tax treaties differ country by country, rates and thresholds change with each Finance Act, and outcomes depend on your specific facts. Please confirm current rules and the relevant treaty with a qualified tax professional before acting.