Written by : Knowledge Centre Team
2025-12-21
4162 Views
14 minutes read
Share
Double taxation can happen in two ways - juridical and economic. In juridical, the income you earn outside India is taxed twice. Once abroad and once in India.
Economic double taxation occurs if your income or a part of your income is taxed twice in India.
Economic double taxation can be part of the law. However, juridical double taxation can put a lot of burden on you as an individual. If your income is double-taxed, you need to know about the Double Taxation Avoidance Agreement (DTAA).
You may have moved out of India to earn a living in a new country. You must be paying taxes in the country as per the country's tax law. Being an Indian (NRI), you must be investing in India. You are liable to pay taxes on the gains you make on your Indian investments. It makes sense, and you must be fine paying the taxes on the capital gains.
However, there could be a situation in which your income gets taxed in both countries. Assume you have to pay a tax of 20% on your income both in the residing country and India. Double taxation occurs.
Double Taxation Avoidance Agreement
The Double Taxation Avoidance Agreement is a treaty signed between the two countries. The treaty ensures that NRI can go outside India and earn a living without the need to pay taxes multiple times. You cannot avoid taxes using DTAA. However, you can use the provisions to reduce your taxes.
The DTAA can be different in different countries. With a few countries, India has signed an agreement covering all income types. It is known as a comprehensive treaty. With others, only certain income types are included in the agreement, known as specific treaties.
Under DTAA, the two countries decide upon a fixed tax rate. Based on the rate set, the tax is deducted from the income earned. The format used for it is Tax Deduction at Source (TDS). If you have already paid taxes in your country, you do not have to pay taxes in India. Currently, India has DTAAs with more than 80 countries.
Some prominent countries with which India has signed a DTAA are:
| United States of America | South Africa |
|---|---|
| United Kingdom | Saudi Arabia |
| Ukraine | Italy |
| UAE | Japan |
| Thailand | China |
| Sweden | Australia |
How does DTAA Work?
Your tax obligation depends on your source of income and residential status. DTAA not only benefits NRIs but also resident Indians earning income from a foreign country. You can benefit from DTAA in two different ways:
- Exemption System: Under the exclusion framework, you do not have to pay taxes in India. You only have to pay taxes in the country where you are working. In other words, you only have to pay taxes in one of the two countries. However, you need to submit a Tax Residence Certificate (TCS).
You are an Indian resident, but you receive interest income from UAE. Such income will be taxable in the UAE. You don't have to pay any taxes in India.
- Credit System: It permits tax paid in one country to be utilized as a credit in other countries. It can be a direct or indirect credit. You pay taxes in both countries, but the country of residence allows you to claim a tax credit.
For example, you are an Indian resident and receive a salary from the US company for the job you did for them. The US follows the source rule. Hence, it will deduct taxes as per the applicable tax rates. Since you reside in India, you have to pay tax on your global income. However, when you file your income tax return, you can set off the claim tax credit against your total tax liability.
Can NRI Invest for Tax Saving in India?
NRIs are eligible to claim various exemptions and deductions on their total income. They can also invest in different tax savings options. Some of the popular ones are:
- Term Insurance: NRIs can buy the term insurance in their name, spouse's name, or children's name. The premium they pay towards the term insurance is eligible for tax deduction under Section 80C.
iSelect Smart360 Term Plan from Canara HSBC Life Insurance offers additional features and benefits. You get a return of premium and in-built coverage for critical illnesses with the life cover.
- Unit Linked Insurance Plans (ULIPs): Unit Linked Insurance Plan offers you combined benefits of investment and insurance. The premium paid towards the ULIPs is eligible for tax deductions. NRIs can avail of tax deductions on the interest earned towards the investment U/S 10(10D) of the IT Act..
ULIP plan from Canara HSBC Life Insurance gives you loyalty additions and wealth boosters with capital growth and tax benefits.
- Equity Linked Savings Scheme (ELSS): NRIs can claim tax deductions up to Rs 1.5 lakhs under Section 80C of the IT Act by investing in ELSS. Your investment in ELSS, the interest earned, and the returns are all tax deducted.
- Health Insurance: NRIs can claim a tax deduction on the premium paid towards health insurance. NRIs can claim deductions up to Rs 50,000 for senior citizens and Rs 25,000 for self, spouse, and children (dependent).
Canara HSBC Life Insurance iSelect Smart360 Term Plan gives you the option to cover yourself and your loved ones against 40 listed critical illness. You can also avail increased cover options to take care of increasing medical needs.
Wrapping Up
As an NRI, you should know the tax rules and the tax you need to pay in India and the country of your general residence. Wherever required, they should report the income earned from athe foreign source. Avoid paying dual taxes with DTAA on your income.
You can also invest in tax saving plans to have financial safety and investment benefits in India along with tax saving.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
Recent Blogs
What Is Tax Liability? Meaning, Calculation & Examples
05 Mar '26
1994 Views
7 minute read
Tax liability is the total tax payable after deductions and exemptions. Learn its meaning, how to calculate tax liability and how it affects ITR filing in India with examples for individuals.
Read More
Tax Saving
FATCA Declaration: Meaning, Eligibility & Filing Guide
25 Feb '26
68 Views
6 minute read
Understand FATCA declaration requirements, who must submit it, reporting rules for foreign financial assets, and why compliance is important for Indian taxpayers.
Read More
Tax Saving
Income Tax Rates in India: Latest Slabs & Comparison Guide
25 Feb '26
78 Views
6 minute read
Explore current income tax rates under old and new regimes, slab-wise comparisons, and practical tips to select the most suitable tax regime for your income profile.
Read More
Tax Saving
Short Term Capital Gains Tax & Calculation | STCG Tax India
23 Feb '26
10715 Views
11 minute read
Understand short term capital gains tax in India. Know how STCG is taxed, rates, and calculation for different assets under current tax rules.
Read More
Tax Saving
What Is TAN? How to Apply for TAN in India
23 Feb '26
1961 Views
10 minute read
What is TAN? Understand its structure, importance, and how to apply for a Tax Deduction and Collection Account Number (TAN) easily in 2026.
Read More
Tax Saving
What is EPF Form 10C? Meaning, Benefits, Eligibility
23 Feb '26
1415 Views
6 minute read
Learn about EPF Form 10C. Its meaning, benefits, and eligibility. Find out how submit form 10C online and how can help you with your Employee Provident Fund.
Read More
Tax Saving
Import Tax in India: Why Imports Are Heavily Taxed?
23 Feb '26
1970 Views
6 minute read
Understand why imports are heavily taxed in India, how import tax works, and the economic and policy reasons behind high import duties.
Read More
Tax Saving
Expenditure Tax in India: Meaning, Applicability & Examples
23 Feb '26
115 Views
6 minute read
Understand the concept of expenditure tax in India, when it applies, sectors affected, calculation approach, and practical examples to clarify its financial implications.
Read More
Tax Saving
TDS on Foreign Remittances: Rates, Limits & Rules Explained
23 Feb '26
37 Views
7 minute read
Learn how TDS applies to foreign remittances under LRS, applicable rates, thresholds, exemptions, and how these deductions affect your overseas payments and tax filing.
Read More
Tax Saving
Tax Savings - Top Selling Plans
We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.
Family Shield: Enhanced Protection
iSelect Smart360 Term Plan
- 3 Plan options
- Life cover till 99 years
- Steady income benefit
- Block your premium at inception
Fixed Returns, Zero Risks & Worries
iSelect Guaranteed Future Plus
- 4 Plan options
- Life cover + Guaranteed benefits
- Accidental death benefit
- Premium protection cover
Start Young, Pay Less, Stay Secured
Young Term Plan
- Life cover till 99 years
- Coverage for spouse
- Block your premium rate
- Covers 40 critical illness
Popular Searches
- Tax Planning
- Income Tax Calculator
- TDS Vs TCS
- Section 80C
- What Is ITR
- Tax Concepts
- Section 80D
- Section 24
- 80DDB
- What is MAT?
- ITR-3 Form
- Term Insurance Tax Benefit
- TDS for Professional Fees
- Income Tax Slab FY 2025-26
- HRA Calculator
- TDS on Rent
- What is Income Tax Return?
- Income Tax for NRI
- How to File Income Tax?
- Section 80C Tax Benefits
- Old vs New Tax Regime
- LTCG Tax on Investments
- Tax Saving Options for Salaried
- Income Tax Rebate under 87A