A UAE-based NRI pays no income tax in the UAE on salary, but India can still treat you as resident in two cases: if you are an Indian citizen whose Indian income is above ₹15 lakh and you are not liable to tax in any other country (the "deemed resident" rule), or if your Indian income is above ₹15 lakh and you spend 120 days or more in India (with 365 days over the previous four years). In both cases you become "resident but not ordinarily resident" (RNOR), so your UAE salary still stays outside Indian tax. What India taxes is your Indian income: rent, NRO interest, capital gains.
Below: the exact rules in the Income-tax Act, 2025, three worked cases, what the India-UAE tax treaty changes, and how your end-of-service gratuity is treated when you move back.
Does the UAE tax your salary?
No. The UAE government portal says plainly: "The UAE does not levy income tax on individuals." The UAE does charge corporate tax on the business profits of companies and other entities, but that matters only if you run a business there. A salaried employee in Dubai or Abu Dhabi pays no tax on wages.
That zero is exactly what makes India's residency rules bite. Most Indian tax rules for NRIs assume you pay tax somewhere else. The deemed resident rule was written for people who pay tax nowhere.
What is the deemed resident rule?
Section 6(7) of the Income-tax Act, 2025 says an individual is deemed to be resident in India for a tax year if all three conditions hold:
- you are a citizen of India;
- you are "not liable to tax in any other country or territory due to his domicile, residence, or similar criteria"; and
- your total income, other than income from foreign sources, is more than ₹15 lakh in that tax year.
Days in India don't matter for this test. You could spend ten days in India and still be caught. Section 6(8) adds that it applies only if you are not already resident under the normal day-count tests.
"Income from foreign sources" is defined in section 6(14): income that accrues or arises outside India and is not deemed to arise in India (except income from a business controlled in, or a profession set up in, India). So your UAE salary is not counted towards the ₹15 lakh. Only your Indian income is: rent from a flat in Kochi, NRO fixed deposit interest, capital gains on Indian shares or mutual funds, and so on.
This rule came in through the Finance Act, 2020 as section 6(1A) of the old 1961 Act. The 2025 Act carries it over unchanged in substance.
Does a UAE resident count as "liable to tax"?
This is the open question for Gulf NRIs. The UAE has no personal income tax, so the plain reading of condition 2 is a risk for you. The Act itself doesn't say whether a UAE tax residency certificate, on its own, makes you "liable to tax" there. If your Indian income is anywhere near ₹15 lakh, get an Indian chartered accountant who handles NRI returns to look at your facts before you file.
The good news is the next section: being deemed resident costs less than it sounds.
What happens if you are deemed resident?
You become RNOR, not a full resident. Section 6(13)(c) lists "a citizen of India who is deemed to be resident in India under sub-section (7)" as not ordinarily resident.
Under section 5(1)(c), an RNOR's income that accrues outside India is taxed in India only if it comes from a business controlled in India or a profession set up in India. Your Dubai salary, UAE bank interest and UAE investments stay out.
What does change:
- You file as RNOR, not as a non-resident, so the residential-status schedule in your return changes.
- Some reliefs and rates written specifically for non-residents may no longer apply to you, since you are no longer a non-resident.
- Your Indian income was taxable anyway. The rule mostly changes your label, not the total, unless you were relying on a non-resident-only treatment.
For more on how RNOR works when you return for good, see the RNOR status guide.
What is the 120-day rule for NRI visitors?
The normal test makes you resident if you are in India for 182 days or more in a tax year. There is a second test: 60 days in the year plus 365 days over the previous four years. For Indian citizens and persons of Indian origin who live abroad and come on a visit, section 6(4) switches that 60-day test off.
Section 6(5) switches it back on, with 120 days instead of 60, if your total income other than income from foreign sources is more than ₹15 lakh. So a UAE NRI with high Indian income becomes resident if:
- you are in India for 120 days or more in the tax year (1 April to 31 March); and
- you were in India for 365 days or more in total over the four preceding tax years.
Section 6(13)(b) then makes you RNOR if you were in India for 120 days or more but less than 182 days. As with deemed residence, your UAE income stays outside Indian tax.
Under the old Act this was the 2020 amendment to Explanation 1 of section 6(1), with the RNOR consequence in section 6(6).
Three illustrative cases
All three are Indian citizens working in Dubai, visiting India during tax year 2026-27, with 500 days in India over the four previous years. I ran each through the section 6 tests with a short script.
| Case | Days in India | Indian income | Liable to tax abroad? | Status |
|---|---|---|---|---|
| A | 100 | ₹10 lakh | No (UAE) | Non-resident: Indian income is under ₹15 lakh, so neither rule applies |
| B | 130 | ₹20 lakh | Any | Resident under the 120-day rule, and RNOR |
| C | 100 | ₹20 lakh | No | Deemed resident under section 6(7), and RNOR |
If the person in case C were liable to tax in their country of residence (say they had moved to London), they would be a plain non-resident with 100 days. That is the whole difference the UAE's zero tax makes. To run your own numbers, use the NRI residential status calculator.
How does the India-UAE tax treaty help?
The India-UAE agreement dates from 1992 and has been amended since. The Income Tax Department publishes a synthesised text. Three parts matter to most NRIs.
- Who is a UAE resident (Article 4). For the UAE, the treaty counts "an individual who is present in the UAE for a period or periods totalling in the aggregate at least 183 days in the calendar year concerned". Note it is the calendar year, while India uses 1 April to 31 March.
- Interest (Article 11). India may tax interest paid to a UAE resident, but the tax "shall not exceed" 12.5% of the gross amount (5% where the lender is a bank). Indian banks deduct 30% plus surcharge and cess on NRO interest under section 393(2) of the 2025 Act (old section 195) unless you give them what they need to apply the treaty rate.
- Capital gains (Article 13). India keeps the right to tax gains on Indian property and on shares of Indian companies. Gains on other property are taxable only where you are resident.
To claim any treaty benefit as a non-resident, section 159(8) of the Act requires a certificate of residence from the government of the other country, plus prescribed documents. In practice that means a UAE tax residency certificate.
The treaty does not create an Indian tax on your UAE salary. As a non-resident or RNOR, Indian law already leaves it alone.
Is your UAE end-of-service gratuity taxed in India?
Usually not, if you handle the timing right. Here is the reasoning, step by step.
How the UAE calculates it
Under Article 51 of Federal Decree-Law No. 33 of 2021, as summarised on the UAE government portal:
- no gratuity if you served less than one year;
- 21 days' basic salary for each of the first five years;
- 30 days' basic salary for each year after that;
- the total can't exceed two years' wage; and
- the employer must pay it within 14 days of the contract ending.
Illustrative example: a basic salary of AED 15,000 a month and eight years' service gives about AED 97,500 (5 × 21 days plus 3 × 30 days, assuming a daily wage of basic ÷ 30). The cap of two years' wage, AED 3,60,000, doesn't bite. Your employer's exact daily-rate method may differ.
When India could tax it
In Indian law, gratuity is "salary" (section 16(c)) and salary is taxed when it falls due or when it is paid, whichever is earlier (section 15(1)). Your gratuity falls due when your UAE employment ends, which is almost always while you are still living in the UAE.
- If you are a non-resident that tax year, India taxes only income received in India or arising in India (section 5(2)). Gratuity for work done in the UAE, paid into your UAE account, is neither.
- If you are RNOR that year (common in the year you move back), foreign income is still outside Indian tax under section 5(1)(c), but income received in India is taxable.
- If you are already a full resident (ROR) when it falls due or is paid, it is part of your global income. Section 19(1) Table Sl. No. 6 allows a deduction for "any other gratuity" received on termination, limited to the lowest of the actual amount, half a month's average salary per completed year, and a limit the government notifies. This deduction is still allowed in the new regime.
The practical rule: take the gratuity into your UAE bank account before you leave, then move it to India yourself. Having your employer wire it straight into an Indian account blurs where it was "received". The timing matters most if your exit is delayed and your return date falls in a tax year where you already count as resident. For the remittance side, see moving money between India and abroad and NRE vs NRO accounts.
For a full worked plan of a Dubai family moving home, read the Dubai NRI retiring in Kochi case study.
Checklist for UAE NRIs before 31 March each year
| Check | Why it matters |
|---|---|
| Add up Indian income only: rent, NRO interest, capital gains, dividends | The ₹15 lakh test ignores your UAE salary |
| Count days in India this tax year and the last four | 120 days plus 365 days triggers residence if Indian income is above ₹15 lakh |
| Keep passport stamps and travel records | Day counts are your evidence if questioned |
| Get a UAE tax residency certificate if you claim treaty rates | Section 159(8) needs it for the 12.5% interest cap |
| Plan big capital gains for a year you stay under ₹15 lakh, where possible | A one-off sale can push Indian income over the line |
| Have the gratuity paid into your UAE account | Keeps it clearly foreign-source and received abroad |
| File your Indian return with the correct status | See the NRI ITR filing guide |
Common mistakes
- Assuming "no tax in the UAE" means no Indian filing. NRO interest, rent and capital gains are taxed in India whatever your status.
- Counting the UAE salary towards ₹15 lakh. The test is income other than income from foreign sources. A ₹50 lakh Dubai salary with ₹3 lakh of Indian interest is well under the line.
- Thinking deemed residence taxes your UAE income. It makes you RNOR, and RNORs aren't taxed on foreign income unless it comes from a business controlled in India or a profession set up there.
- Forgetting the one-off gain. Selling a flat in India can produce a ₹40 lakh capital gain in a single year. That alone crosses ₹15 lakh. Our NRI property sale guide covers the TDS side.
- Using the UAE's 183-day rule for India. The treaty's 183 days is a calendar-year test for UAE residence. India's 182 and 120-day tests run on the Indian tax year.
- Letting the employer send gratuity to India. Keep the first receipt in the UAE.
These rules depend on your full facts in both countries, including any business you run and how your UAE residence is documented, so treat this as the map rather than the ruling on your case.
