DTAA Explained: How NRIs in Singapore & UAE Can Have Zero Taxes on Indian Financial Investments

In recent years, Indian financial investments have become one of the most popular investment avenues for Non-Resident Indians (NRIs). Whether it’s wealth diversification or India’s long-term growth story - NRIs are actively allocating capital to Indian equity and debt markets.

However, many NRIs often overlook one key factor that can make a big difference to their post-tax returns - the Double Taxation Avoidance Agreement (DTAA).

What Exactly Is DTAA?

DTAA (Double Taxation Avoidance Agreement) is a treaty between two countries that ensures the same income is not taxed twice - once in the country where it is earned, and again in the country of residence.

India has signed DTAAs with over 85 countries, including major NRI hubs such as Singapore and the UAE.

For NRIs, this is crucial. It means that the income you earn from your investments in India like dividends or capital gains will either be:

• Taxed only in one country, or
• Taxed in both countries, but with a tax credit or rebate available in your resident country.

Why DTAA Matters for NRIs

Without DTAA, NRIs could face double taxation:

• First, India taxes your income (like capital gains from investments).
• Then, your resident country (like Singapore or the UAE) could also treat the same income as taxable.

With DTAA, NRIs can avoid or reduce this double burden.

(PS. This is applicable only for moveable financial assets i.e., mutual funds, shares, securities etc. Real-estate CG rules don’t apply here because capital gains from selling property in India are always fully taxable in India for NRIs, and the Section 87A rebate is only for residents, so NRIs cannot claim it.)

Why NRIs Should Care About DTAA and How It Works

For NRIs in Singapore and the Middle East, the Double Taxation Avoidance Agreement (DTAA) can make Indian investments far more tax-efficient. Under the India–Singapore DTAA, the Income Tax Appellate Tribunal (ITAT) has ruled that financial assets fall under the residual clause of Article 13(5), granting exclusive taxing rights to the country of residence. And since Singapore and many Middle Eastern countries like the UAE, Saudi Arabia, Qatar, and Oman have no capital gains tax, NRIs residing there can often enjoy zero tax on their redemptions.

With valid documentation these investors can effectively make their Indian investment gains tax-free in both countries, ensuring compliance while maximizing post-tax returns.

How Zero-Taxation Works for NRIs on Financial Gains

Say you’re an NRI in Dubai having ₹10 lakhs gain from your Indian mutual funds.

• Under the India - UAE DTAA, India can tax the income, but the UAE either exempts it or gives credit for the tax paid in India.
• Since the UAE doesn’t levy capital-gains tax, your effective tax can be almost zero once proper documents are submitted.

As there’s no personal income tax in middle-east, DTAA ensures you only pay taxes (if any) in India. TDS is normally deducted by the AMC at redemption 20% for short-term equity, 12.5% for long-term equity gains above ₹1.25 lakh, and up to 30% for debt/non-equity funds. But this TDS can be avoided/refunded fully..

Avoiding TDS Upfront: TDS can be fully avoided if you submit your Tax Residency Certificate (TRC) and Form 10F before redeeming. With these documents submitted, AMCs can apply DTAA benefits upfront, which often results in no tax being deducted at all, especially for bulk redemptions.

If TDS is already deducted: If the TRC is not submitted in advance or the AMC deducts TDS, you can use the alternative route: redeem first → file your Indian ITR → claim DTAA relief under Section 90/91 using your TRC. The TDS withheld is then refunded once your return is processed, ensuring your final tax liability remains nil.

How to Avail DTAA Benefits

To claim DTAA benefits, NRIs need to complete a few key formalities:

1. Get a Tax Residency Certificate (TRC) from the tax authority of your resident country (e.g., IRAS in Singapore or Ministry of Finance in UAE).
2. Submit Form 10F, a self-declaration under Indian tax rules confirming your residency and tax ID.
3. Provide a declaration of No Permanent Establishment (PE) to confirm you don’t have a taxable business base in India.
4. Ensure PAN and NRI KYC compliance, linking your mutual-fund investments correctly.
5. Have active NRE/NRO accounts for smooth repatriation and FEMA compliance.

Once these are in place, you can get the tax benefits under the relevant DTAA.

Final Thoughts

The DTAA empowers NRIs to make cross-border investing simpler and more tax-efficient. With the right documentation, NRIs especially those in Singapore and the Middle East can often enjoy zero or minimal tax on Indian financial gains. For others, DTAA still ensures fair credit and protection against double taxation.

At FinAtoZ, we help investors turn these complex rules into opportunities protecting their wealth, simplifying compliance, and ensuring their money works globally.