It feels like just yesterday you were prepping for your TOEFL, GMAT, or GRE, bags packed with dreams, boarding flights to foreign shores. Now, you’re a professional living your best life in Boston, Berlin, Sydney, or Singapore. But with success abroad comes an old friend that keeps following you—taxation.
This post is for all of you Indians working overseas, managing your lives in two countries—your new home and your motherland. Let’s decode your tax liabilities in India and abroad and how Double Taxation Avoidance Agreements (DTAA) can protect your earnings.
Tax Liabilities in India for NRIs
If you’re a Non-Resident Indian (NRI):
- Only Indian-sourced income is taxed in India. This includes salary received in India, rental income, capital gains from Indian investments, and dividends.
- Foreign income is not taxed in India.
- Use ITR-2, not ITR-1. Link PAN with Aadhaar and verify bank details on the IT portal.
- Form 67 and a Tax Residency Certificate (TRC) are needed to claim foreign tax credits under DTAA.
- NRE/FCNR interest is exempt, but must still be reported.
- Dividend income from Indian companies is taxed at 20% (Section 115A). The Section 87A rebate does not apply to NRIs.
Tax Liabilities in Host Countries + DTAA Benefits
Here’s what you need to know about tax responsibilities in your host country and how treaties help:
| Country | Host Tax Regime | DTAA Relief with India | Key Forms & Notes |
| USA | FTC: The treaty covers salary, dividends, and pensions | FTC via Form 1116; FEIE via Form 2555; TRC required. Claim treaty benefits using Form 8833 | 1040 or 1040-NR; 8843 for F-1/J-1 exemptions |
| UK | Worldwide income or remittance basis (optional) | FTC available; treaty caps on interest (15%) and dividends (10%) | Worldwide income is taxed for residents; non-residents are taxed on U.S. source income |
| Canada | Worldwide income taxed | FTC method; treaty limits withholding tax | T1 Personal Income Tax Return + TRC + Form 67 |
| Australia | Worldwide income taxed | FTC available; interest/dividends taxed at 15% | Tax Return with ATO + Form 67 in India |
| NZ | Worldwide income taxed | Similar DTAA provisions; FTC and TRC required | IR3 Return + TRC + Form 67 |
| Ireland | Worldwide income taxed | FTC; treaty covers salary, dividends, pensions | Form 11 Return; India: ITR-2 + Form 67 |
| Germany | FTC: The treaty covers salary, dividends, and pensions | DTAA relief on interest (10%) and dividends (15%) | ELSTER return + TRC + Form 67 |
How DTAA Saves You From Paying Twice
What is DTAA?
A Double Taxation Avoidance Agreement (DTAA) ensures you’re not taxed twice on the same income in two countries.
How it works:
- Tax Credit Method: You pay tax abroad, then claim credit in India by filing Form 67.
- Exemption Method: Less common. Income is taxed in only one country.
Required Documents:
- Tax Residency Certificate (TRC) from the host country
- Form 67 on India’s IT portal
- The host country returns as evidence
US-India Specifics:
- Claim foreign tax credit using Form 1116 or exclusion via Form 2555
- Form 8843 exempts F-1/J-1 students from the Substantial Presence Test for 5 years
- Form 8833 is used when claiming treaty benefits
New UK Tax Rules (2025 Onward)
- From April 2025, the UK is moving to a 4-year residence-based system, replacing the old 15-year non-domicile rule
- Remittance basis still available for now, but personal allowances may be lost
Your NRI Tax Flow (Simplified)
Earn Abroad → Pay Local Tax → File Host Country Return
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Claim DTAA via TRC + Form 67
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File Indian ITR-2 (India-sourced income only)
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