If you’re an NRI earning income in India and your country of residence, you may be at risk of paying tax twice on the same income. The good news is, there’s a legal way to avoid this — through the Double Taxation Avoidance Agreement (DTAA).
Unfortunately, many NRIs are not fully aware of how DTAA works, and as a result, they end up overpaying tax or failing to claim rightful benefits.
This blog explains what DTAA is, why it matters, and how you can take advantage of it as a globally earning individual.
What is DTAA?
The Double Taxation Avoidance Agreement (DTAA) is a tax treaty that India has signed with more than 90 countries, including the USA, UK, UAE, Canada, Australia, and Singapore.
The purpose of DTAA is to ensure that income earned in one country is not taxed again in another. If used correctly, this agreement allows you to either:
- Claim tax credit for the taxes paid in the foreign country
- Pay tax at a reduced rate on certain types of income (like dividends, royalties, or capital gains)
- Avoid paying tax entirely on some incomes depending on the treaty provisions
Why Should You Use DTAA?
As an NRI, not using DTAA benefits can lead to:
- Paying income tax twice — once in India and once in your country of residence
- Missed tax refunds or benefits you’re legally entitled to
- Higher effective tax rates on interest, dividends, or pensions
- Regulatory issues or complications in your overseas filings
In short, not using DTAA is a direct loss of income and long-term savings.
Who Can Claim DTAA Benefits?
You are eligible to claim DTAA benefits if:
- You are a non-resident under Indian tax law (typically stayed in India less than 182 days in a financial year)
- You are a tax resident of another country with which India has a DTAA
- You have paid taxes on the same income in both countries or have taxable income from India
How to Claim DTAA Benefits (Step-by-Step Guide)
- Determine Your Tax Residency Each Year
Verify that you meet the non-resident status in India. Track your physical presence and confirm you stayed less than 182 days during the financial year. - Obtain a Tax Residency Certificate (TRC)
Get a TRC from the tax authority of your country of residence. This certificate is mandatory for availing DTAA relief. - File Form 10F
Submit this form along with the TRC. It provides details about your residential status, tax ID, and purpose for claiming treaty benefits. - Maintain Proof of Foreign Tax Paid
Keep all documentation showing the tax deducted or paid in your country of residence — such as salary slips, tax returns, or withholding certificates. - Claim Credit While Filing Your Indian Tax Return
If you’ve already paid tax abroad, claim the relief while filing your Indian income tax return by disclosing foreign income and tax paid. This avoids double taxation.
Common DTAA Use Cases
- Interest from NRE/NRO accounts
- Rental income from property in India
- Dividends from Indian stocks
- Capital gains on shares or mutual funds
- Salary from Indian employment while living abroad temporarily
Key Countries with DTAA Agreements with India
India has DTAA treaties with over 90 countries. Some of the most commonly used include:
- United States
- United Arab Emirates
- United Kingdom
- Canada
- Australia
- Singapore
- Germany
- Netherlands
Each treaty has different rates and rules. It’s important to review the relevant treaty to apply the right method (tax credit, exemption, or lower rate).
Summary: What Every NRI Must Know About DTAA
- If you’re paying tax in both India and your country of residence, you’re likely eligible for DTAA relief
- India’s treaties allow for exemptions, lower tax rates, or credit for foreign taxes paid
- You must maintain proof, get a TRC, and file the necessary forms to claim this benefit
- Failing to use DTAA could mean losing 10 to 30 percent of your income unnecessarily
Final Thought
Smart financial planning begins with tax efficiency. As an NRI, understanding and applying DTAA can protect your income, improve your returns, and keep you compliant in both countries.
If you’re unsure whether you qualify for DTAA or how to claim it properly, consult a tax advisor familiar with cross-border taxation. The right guidance can save you substantial amounts over time.