NRI in UAE — Do You Need to File an Indian Income Tax Return for FY 2025-26? Residency, ITR-2, TDS Refunds and DTAA

20 September 2026 · NRI Taxation · I. H. Khan and Associates

A large part of our practice is Indians living and working in Dubai, Abu Dhabi and Sharjah who still have a flat in Thane, a fixed deposit in Mumbai or shares bought before they left. The question we hear most often is simple — "I earn nothing in India, do I still need to file?" — and the answer is usually "it depends on three things": your residential status, the Indian income you actually have, and whether tax has been deducted that you would like back. This note walks through each for FY 2025-26 (assessment year 2026-27).

1. First, confirm your residential status

Indian tax residency is decided by days of physical presence in India during the financial year (1 April 2025 to 31 March 2026), not by your visa, passport or where your salary is paid.

182 days or more in India — you are a resident and your worldwide income, including UAE salary, is taxable in India (subject to treaty relief).
Fewer than 182 days — you are generally a non-resident (NRI). Only income that accrues, arises or is received in India is taxable.
The 120-day rule — an Indian citizen or person of Indian origin whose Indian-sourced income exceeds ₹15 lakh, who spends 120 to 181 days in India in the year and 365 days or more in the preceding four years, is treated as resident but not ordinarily resident (RNOR). Foreign income stays outside Indian tax, but the filing obligations change.
Deemed residency — an Indian citizen with Indian-sourced income above ₹15 lakh who is not liable to tax in any other country by reason of domicile or residence may be treated as RNOR even without visiting India. Because the UAE levies no personal income tax, this provision needs careful analysis for high-income UAE residents; the position depends on your facts and on the UAE tax residency certificate you hold.

Keep a simple travel log from your passport stamps. It is the first thing the Assessing Officer asks for if your status is ever questioned.

How residential status is decided — the residence tests of the Income-tax Act, 2025, which carry forward the 1961 Act tests unchanged. Count the days you were physically in India during the financial year, including the days of arrival and departure.

Test 1Were you in India for 182 days or more in the year?

YesResident. Go to the RNOR check below. Otherwise move to Test 2.

Test 2Did you leave India to take up employment abroad or as crew, or are you an Indian citizen / person of Indian origin visiting India?

YesThe 60-day rule does not apply. If you left for employment or as crew, you are resident only at 182 days. If visiting, the limit is 182 days — reduced to 120 days when your Indian income (excluding foreign sources) exceeds ₹15 lakh and you had 365 days here in the previous four years. Below the limit: non-resident.

Test 3Everyone else: 60 days or more this year and 365 days or more in the previous four years?

Yes → Resident · No → Non-residentA non-resident pays Indian tax only on income received or accruing in India — rent, Indian capital gains, interest on NRO deposits and the like.

RNOR check for residentsYou are resident but not ordinarily resident if you were non-resident in 9 of the previous 10 years, or spent 729 days or fewer in India over the previous 7 years, or became resident only through the 120-day rule. An RNOR is not taxed on foreign income unless it comes from a business controlled from India.

Deemed residentAn Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country is deemed resident even with no days in India — and treated as RNOR. Most people settled in the UAE are covered by UAE residence, but check this if you split the year between countries.

2. Which income is taxable in India for an NRI

Income	Taxable in India?	Tax deducted at source
Salary earned for work performed in the UAE, credited to an NRE or UAE account	No	None
Interest on NRE and FCNR deposits	No (exempt while you remain non-resident under FEMA)	None
Interest on NRO savings and fixed deposits	Yes, at slab rates	30% plus cess by the bank
Rent from property in India	Yes, after standard deduction of 30% and interest on housing loan	30% plus cess by the tenant under section 393 (195 of the 1961 Act)
Dividends from Indian shares and mutual funds	Yes, at slab rates (10% under the India–UAE treaty with a TRC)	20%, or the treaty rate where documents are given to the company
Long-term gains on listed shares and equity funds	Yes — 12.5% on gains above ₹1.25 lakh	By the broker or fund on redemption
Short-term gains on listed shares and equity funds	Yes — 20%	By the broker or fund on redemption
Sale of a flat or land held for more than 24 months	Yes — 12.5% without indexation	Buyer deducts on the full sale price unless you obtain a lower-deduction certificate
Business or professional income from Indian clients	Yes	Depends on the nature of the payment

Rates for FY 2025-26; surcharge and 4% cess apply in addition. Treaty benefits require a UAE Tax Residency Certificate, Form 10F and a no-permanent-establishment declaration.

3. When filing is compulsory — and when it is simply worthwhile

An NRI must file a return if total Indian income, before deductions, exceeds the basic exemption limit: ₹4 lakh under the default new regime or ₹2.5 lakh under the old regime. Two points catch people out. First, the rebate under section 156 (87A of the 1961 Act) that makes income up to ₹12 lakh tax-free for residents is not available to non-residents, so an NRI with ₹6 lakh of Indian rent and interest does pay tax. Second, the higher exemption limits for senior citizens apply only to residents.

Filing is also compulsory, regardless of income, if during the year you deposited more than ₹1 crore in current accounts, spent more than ₹2 lakh on foreign travel or ₹1 lakh on electricity, or had TDS and TCS of ₹25,000 or more in aggregate.

Even where filing is not compulsory, it is often the only way to get money back. Banks deduct 30% on NRO interest and tenants deduct 30% on rent irrespective of your actual slab. A UAE-based NRI with ₹3 lakh of NRO interest has had roughly ₹93,600 deducted and owes nothing — but the refund is paid only against a filed return, into a pre-validated Indian bank account. Filing is also required to carry forward capital losses and to claim treaty rates that were not applied at source.

4. Which form, and by when

Non-residents cannot use ITR-1 or ITR-4. Use ITR-2 for salary, house property, capital gains and other sources, and ITR-3 if you have business or professional income in India. Schedule FA (foreign assets) is not required from a non-resident, but the residential status schedule, the days-of-stay declaration and details of your overseas tax identification are.

The due date for FY 2025-26 was 31 July 2026 for ITR-1 and ITR-2, and 31 August 2026 for ITR-3 and ITR-4 filers not liable to tax audit — a permanent change to section 263 (139(1) of the 1961 Act) made by the Finance Act 2026, not a departmental extension. If you have not yet filed, a belated return can still be filed up to 31 December 2026, with a late fee of ₹5,000 (₹1,000 if total income does not exceed ₹5 lakh) and interest at 1% per month on any unpaid tax. A belated return is processed under the new regime, and capital losses cannot be carried forward from it — so if you sold shares at a loss this year, file sooner rather than later.

5. The mistakes we correct most often

Bank accounts still marked resident. Once you move abroad your savings account must be redesignated NRO and new deposits routed through NRE. Interest on an account wrongly held as resident is fully taxable and reported to the department under your PAN.
Selling property without a lower-deduction certificate. The buyer must deduct tax on the entire consideration, not the gain. An application in Form 13 before the sale agreement limits the deduction to the actual tax due and avoids waiting a year for a large refund.
Claiming treaty rates without paperwork. The 10% dividend and 12.5% interest rates under the India–UAE treaty are available only with a valid UAE Tax Residency Certificate for the relevant year and an electronically filed Form 10F.
Returns filed as ITR-1 by a portal or relative. A non-resident's return in ITR-1 is defective and can be treated as not filed.
Refunds stuck for want of a validated account. The refund account must be an Indian account linked to your PAN and pre-validated on the portal; an NRO account works, a closed resident account does not.
Missing e-verification. A return that is not verified within 30 days is treated as never filed. If your Indian mobile number is no longer active, verify through net banking or a digital signature.

6. What changes from next year

The Income-tax Act, 2025 replaces the 1961 Act with effect from 1 April 2026, so the return for FY 2026-27 will be filed under new section numbers and the term "tax year". The residency tests, the 120-day rule and the deemed residency provision are carried over without substantive change, so the analysis above will remain the starting point next year as well.

How we help UAE-based NRIs

We handle NRI returns end to end from Mumbai and Thane — status determination, ITR-2 preparation, TDS refund claims, lower-deduction certificates for property sales and treaty documentation — with everything coordinated over WhatsApp and email in your time zone. Read more about our income tax services or send us your Form 26AS and AIS for a quick assessment.

I. H. Khan and Associates
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.

NRIs in the UAE: do you need to file an Indian income tax return for FY 2025-26?