A non-resident for tax purposes? Know about double taxation avoidance agreement provisions | Mint

I got a job in Dubai through campus placement and left India in August 2023. However, I had to quit in October 2024 for personal reasons and returned to India in early November 2024. Can I be considered a non-resident in India for this tax year? If not, what happens to my Dubai salary? Can I take the help of provisions under the double taxation avoidance agreement (DTAA)?

-Name withheld on request

Since you have returned to India in November 2024, and if you continue to stay until 31 March 2025, your stay will exceed 60 days in this financial year. Additionally, assuming you were studying in India before taking up the job in the UAE, your total stay over the past four years will exceed 365 days. Therefore, you will qualify as a resident under section 6(1)(c) of the Income Tax Act, 1961 even if your stay in FY2024-25 may be below 182 days. Also, if you don’t meet the ‘not ordinarily resident’ criteria of having been a non-resident in nine out of the previous ten financial years or having stayed less than 729 days in the previous seven financial year, you’ll be classified as a ‘resident and ordinary resident’ (ROR). Accordingly, your global income for FY2024-25, including your UAE salary, will become taxable in India.

To apply for the India-UAE DTAA provisions, you first need to determine your residential status under DTAA. You will be an ROR in India for FY2024-25. But you may also qualify as a resident of the UAE for the calendar year 2024 if you obtain a tax residency certificate (TRC) since your stay in the UAE will be more than 183 days for calendar year 2024 which is the condition present under Article 4 of the India-UAE DTAA to qualify as a UAE resident. Thus, from April 2024 until your return in November 2024, you will be considered a dual resident under the DTAA. 

The DTAA has a set of four sequential tie-breaker tests to establish where your ties are stronger so that the respective state can have the right to tax you as a resident. However, your facts are insufficient to make this assessment. Only if you are able to break the tie in favour of UAE for this overlap period will you have split residency in India for FY2024-25, i.e., being a resident of the UAE as per DTAA for the period between April 2024 and your date of return to India in November 2024; and thereafter being a resident of India till 31 March 2025. 

Being a resident of UAE for the earmarked period, you will be able to claim non-taxation in India for the salary that you would have earned in the UAE. Otherwise, the provisions of DTAA will not come to your rescue to protect your overseas salary income from taxation in India for FY2024-25.

Harshal Bhuta, partner, P.R. & Co. Chartered Accountants