Gulf Tax Guide 2025 for NRIs: DTAA, Residency, Remittances

India’s 2025 tightening of non-resident tax rules is rippling through the Gulf, where millions of Indian workers have long relied on tax-free salaries and simple remittance routines. With the UAE’s corporate tax now in force and Saudi Arabia’s Zakat and corporate tax regime expanding in scope, Indian authorities are pressing NRIs to show where they truly live and earn, and to prove it on paper.

The result is a new wave of documentation checks built around Double Taxation Avoidance treaties and India’s updated residency tests, a shift that tax advisers say is causing anxiety among Gulf-based families who believed they were far from India’s tax net.

The core change: the “deemed resident” rule

At the heart of the change is India’s “deemed resident” clause, which can trigger when an individual’s Indian-sourced income exceeds ₹15 lakh and they are not taxable in any other country.

• For Gulf NRIs, who often do not pay personal income tax locally, the rule makes residency records essential even if salary is paid in Dubai, Abu Dhabi, Riyadh, or Jeddah.
• If they fail the test, India can treat them as residents and tax their global income.

That risk has turned this year’s Gulf Tax Guide from a routine checklist into a survival manual, as families weigh travel days, bank account types, and treaty paperwork to keep their status clear.

Treaty framework and what it protects

The legal framework remains favorable if NRIs get the basics right. India has Double Taxation Avoidance Agreements (DTAAs) with the UAE, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain.

Key treaty features (India–UAE DTAA and India–Saudi DTAA examples):
– Article 4 — defines residence.
– Article 7 — taxes business profits only where operations occur.
– Articles 10–12 — cap withholding on dividends, interest, and royalties.
– Article 13 — taxes capital gains where the asset is located.
– Article 24 — ensures relief to avoid double taxation.

The India–Saudi Arabia DTAA (signed 2006, effective 2007) provides similar relief: employment income earned in Saudi Arabia stays out of India’s tax base when the person is an NRI, and treaty rates limit Indian withholding on specified payments to the 10–12.5% range.

Increased enforcement around documentation

What has changed is enforcement: NRIs now face stricter demands to show residence abroad to claim treaty relief in India.

• The UAE’s Tax Residency Certificate is the anchor document. Residents can apply through the Ministry of Finance portal and use the certificate to back DTAA claims in India.
• Authorities want to see:
  • Where the salary was credited
  • Proof that the person’s center of life is outside India
• The certificate is the strongest form of proof and is being requested more often in assessments and bank compliance checks.

Saudi-based professionals rely on Iqama and local certification through ZATCA, which, when paired with income records, aligns with treaty needs.

Official guidance and forms:
– India’s Form 10F guidance: https://www.incometax.gov.in/iec/foportal/help/individual/huf/form-10f
– UAE Tax Residency Certificate service: https://mof.gov.ae/en/services/tax-residency-certificate

These documents, combined with bank proofs of salary credit, form the core of today’s DTAA files.

Domestic rules that still matter

India’s domestic residency rules remain the starting point.

• The classic 182-day threshold in a financial year remains central: stay under that in India and you are typically non-resident.
• For most Gulf employees, salary credited to a UAE or Saudi bank account remains outside Indian tax when NRI status is preserved.
• Key tax points:
  • Interest on NRE accounts is exempt while NRI status continues.
  • Interest on NRO accounts can draw 30% TDS unless reduced by treaty.
  • Dividends from Indian companies face 10% withholding under relevant treaty caps.
  • Capital gains from sale of assets located in India (property, equity) remain taxable in India, though DTAA ensures credit or exemption to avoid double taxation.

Edge cases and behavioural responses

Pressure builds in edge cases where facts push taxpayers over thresholds.

• Triggers reported by consultants include:
  • Long summer stays in India
  • High Indian rent income
  • Director fees or other Indian-sourced receipts
• When Indian-sourced income crosses ₹15 lakh and no foreign personal tax applies, Section 6(1A) (deemed resident rule) can apply.

Common NRI responses:
1. Spread Indian investments across spouses.
2. Adjust travel plans to stay under 182 days.
3. Move interest-generating deposits into NRE or FCNR accounts.
4. Separate salary and remittance accounts to simplify audit trails.
5. Archive salary slips and proof of foreign bank credits each pay period.

Employers in project-heavy sectors (construction, energy, healthcare) are advising staff to maintain robust documentation.

Gulf specifics: Saudi projects and UAE corporate tax

In Saudi Arabia, major project workers (Aramco, SABIC, NEOM) ask whether India can tax their salary. The treaty answer is consistent:

• Employment income earned and received in Saudi Arabia is not taxed in India when the person is an NRI.
• The same principle applies in the UAE.

Corporate tax changes (UAE corporate tax 9%, Saudi corporate tax and Zakat) have not changed personal income treatment for expatriates. Instead they have prompted banks and employers to tighten KYC and proof-of-residence protocols, indirectly affecting NRIs’ India-facing files.

Claiming treaty relief: the process

Treaty relief is a process, not a presumption. Steps typically include:
1. Self-declaration via Form 10F.
2. Attach the Tax Residency Certificate from the foreign jurisdiction.
3. Disclose treaty relief in the Indian return using the relevant schedule.
4. Furnish supporting records if asked by Indian authorities.

The Indian tax portal carries guides for Form 10F and treaty claims (see the Form 10F help page linked above).

Social security and end-of-service benefits

NRIs are also watching the social security gap.

• India has Social Security Agreements with several countries, but none yet with the UAE or Saudi Arabia.
• Result: provident fund portability and pension credits do not transfer automatically.
• Gulf labor laws provide end-of-service benefits:
  • UAE: 21 days of salary per year of service after one year (Labour Law 33/2021).
  • Saudi Arabia: 0.5 month’s wage per year for first five years; 1 month for each additional year.
• These benefits are not linked to India’s EPFO or NPS yet, but India is exploring future portability and a possible India–UAE social security/mobility agreement.

Workers are advised to preserve gratuity settlement letters and service certificates carefully.

Scale and practical impact

• The Gulf hosts over 9 million Indians — the world’s largest overseas Indian community.
• Remittances from the UAE and Saudi Arabia together account for over 55% of total flows to India — about $50 billion each year by several estimates.
• Banks in Dubai and Riyadh report a modest rise in requests for account statements and stamped salary credits timed to Indian filing seasons.
• Auditors in India increasingly ask for treaty documents when NRIs report Indian dividends or capital gains.

Even when no Indian tax is due on foreign salary, the paper trail is decisive.

Business owners and permanent establishment considerations

For NRIs who run businesses in the Gulf, the DTAA rules on business profits matter:

• Taxation depends on where operations occur and whether a permanent establishment (PE) exists in India.
• Traders and consultants based in the UAE or Saudi Arabia with no Indian PE usually have business income taxed where operations are based.
• India still taxes Indian-source income such as interest from NRO accounts and capital gains on Indian assets.
• With the UAE’s 9% corporate tax and Saudi corporate tax/Zakat regimes active, cross-border owners coordinate filings to maintain DTAA relief (Article 24 in India–UAE pact is the main relief channel).

Practical checklist for families and individuals

Simple steps that keep life predictable:
– Track passport stamps to confirm fewer than 182 days in India.
– Renew Emirates ID or Iqama on time.
– Store salary slips in a cloud folder and keep bank credit proofs.
– Move appropriate Indian deposits to NRE accounts.
– Keep Indian income below ₹15 lakh where possible to avoid deemed resident rules.
– Seek tailored advice if thresholds cannot be avoided — document first and argue less.

The guiding idea: assemble the file carefully — Tax Residency Certificate, Form 10F, bank credits, identification cards — to make treaty relief straightforward.

Conclusion

The Gulf remains broadly favorable for NRIs, but it is no longer paperwork-free. DTAAs continue to protect salaries, dividends, and specified payments from double taxation, and the lack of personal income tax in the UAE and Saudi Arabia still benefits expatriates.

However, the burden has shifted to the individual to prove where they live and how they earn. The more carefully NRIs assemble their documentation, the smoother the Indian compliance side runs — and the more effectively Double Taxation Avoidance can do what it has long done for Indian families: let money earned in the Gulf support life at home without being taxed twice.