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cajdshah.com-How Can NRIs Avoid Double Taxation

When someone lives in one country but earns money in another, sometimes both countries want to tax the same income. Thatu2019s called double taxation. For NRIs (Non-Resident Indians), this can be a tricky problem. But there are clear ways to reduce or avoid itu2014if you plan smartly. In this article, we explain easy steps, and how JD Shah Associates helps via our auditing & taxation, tax audit, and income tax services.

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cajdshah.com-How Can NRIs Avoid Double Taxation

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  1. How Can NRIs Avoid Double Taxation? cajdshah.com/blog/how-can-nris-avoid-double-taxation jdshah When someone lives in one country but earns money in another, sometimes both countries want to tax the same income. That’s called double taxation. For NRIs (Non-Resident Indians), this can be a tricky problem. But there are clear ways to reduce or avoid it—if you plan smartly. In this article, we explain easy steps, and how JD Shah Associates helps via our auditing & taxation, tax audit, and income tax services. Table of Contents What Is Double Taxation? Double taxation means your same income is taxed twice — once in the country where it was earned (source country) and again in your country of residence. For example: you live in the UAE but rent a house in India. India may tax your rental income. Your country of residence might also say, “You earn globally, so we also tax you.” That’s double taxation. To help with this, many countries (including India) sign Double Taxation Avoidance Agreements (DTAA). Under these, you can get relief (like claiming credit for tax paid elsewhere). In India’s tax law, Sections 90 and 91 deal with this relief. How NRIs Can Avoid Double Taxation — Key Methods Below are major ways in which NRIs can reduce or avoid double taxation. 1/9

  2. 1. Use DTAA (Double Taxation Avoidance Agreement) What it means: India has DTAA treaties with many countries (USA, UK, UAE, Singapore, Canada, etc.). These treaties specify which country gets to tax what kind of income (salary, interest, capital gains, dividends, etc.). Useful tips: You must get a Tax Residency Certificate (TRC) from your country of residence so India knows you are taxed elsewhere. You may also need to file Form 10F in India (gives extra details not in TRC). Use Form 67 to claim credit for tax paid abroad when filing your Indian return. Check the specific treaty between India and your country, because not all incomes are covered or the rates vary. How JD Shah Associates can help: We assist in interpreting the correct DTAA stipulations, preparing and filing the required forms (10F, 67 etc.), verifying TRC, and making sure the benefit is claimed properly in your income tax declaration. In our auditing & taxation wing, we ensure your foreign income disclosures match audits and cross-checks. 2/9

  3. 2. Claim Foreign Tax Credit (FTC) What it means: If you’ve paid tax on that income in the foreign country, India allows you to reduce your Indian tax by that amount (or part of it). This prevents you from paying full tax again. This is often called unilateral relief (if no DTAA) or under DTAA (bilateral relief). Useful tips: Keep proof of foreign tax paid (tax returns, receipts). The credit is limited — you cannot reduce Indian tax below zero; you may not recover the full foreign tax if rates differ. Claim via Form 67 together with Indian income tax return (ITR). Be careful of timing — matching the right year of foreign tax with the Indian year. How JD Shah Associates helps: Our income tax declaration team helps you compute the correct foreign tax credit, reconcile foreign and Indian incomes, and ensure proper documentation. During tax audit or internal reviews, we examine whether the claimed credits are valid. 3. Exemptions or Reduced Rates under DTAA What it means: Some DTAAs provide exemptions (income that India will not tax) or lower withholding (tax deducted at source) rates on certain incomes (interest, dividends, royalties). For example, instead of 30% interest tax, DTAA may allow 10%. Useful tips: For incomes like interest or royalties, request a lower TDS (tax deduction at source) certificate under DTAA. Use the reduced rates while filing investments or bank deposits. Sometimes you must apply in advance (before deduction) to avail the lower rate. 3/9

  4. How JD Shah Associates helps: We guide you to apply for lower TDS certificates (via Indian tax authority), ensure banks or payers deduct at correct DTAA rate, and reflect correct rates in your audits or financial statements under our Audit & Assurance services. 4. Correctly Classifying Your Residential Status What it means: Whether India sees you as a Resident or Non-Resident for tax matters determines how much of your income is taxable. If misclassified, you could lose DTAA benefits or get taxed more. Useful tips: Under Indian law, stay rules (number of days in India) decide status. If you cross certain thresholds, you might be “resident but not ordinarily resident” (RNOR). Re-check your country’s rules too (you might be a tax resident there). Keep travel records, passports, entry/exit stamps. How JD Shah Associates helps: 4/9

  5. In our auditing and taxation and income tax declaration services, we analyze your stay, tie- breaker rules under DTAA, and advise the most beneficial status. In case of disputes, we help prepare arguments with documentation. 5. Advance Tax & Withholding Compliance What it means: If your tax liability is large, you may need to pay advance tax in quarters. Also, pay attention to withholding/tax deduction at source (TDS) rules in India. If rules are missed, you may be penalized. Useful tips: If total tax liability exceeds ₹10,000, you may need to pay quarterly advance tax. Ensure correct TDS is deducted by payers (e.g. on rent, interest, payments). File your ITR even if TDS is more than your liability (to claim refunds). Misdeclaration or late advance tax leads to interest or penalty. How JD Shah Associates helps: We help compute your liability, remind you of deadlines, assist in paying advance tax, and make sure withholdings are correct. In any tax audit, we confirm that advance tax and TDS compliance is spot on. 6. Structure Your Investments & Income Smartly What it means: Sometimes how you invest or where you receive income influences tax burden. For instance, using certain investment vehicles or structuring ownership in a tax- friendly manner. Useful tips: Understand that some investment returns might be exempt or taxed lower under DTAA. If possible, hold investments through entities or jurisdictions that give tax benefits (mind legal/ethical boundaries). Avoid aggressive arrangements that may attract General Anti-Avoidance Rules (GAAR). Consult before shifting money or assets abroad or back to India. 5/9

  6. How JD Shah Associates helps: In our advisory arm, we analyze your portfolio and suggest tax-efficient structures. In audit & assurance, we check if these structures comply with law and don’t raise red flags. FAQs & Quick Checklist Question Answer Do NRIs need to file ITR in India? Yes, if your income in India exceeds exemption limits or TDS is deducted, or you want a refund. Can I claim foreign tax credit? Yes, if you paid tax abroad on that income, subject to rules and limits. What is the usual DTAA reduction for interest or dividends? It depends on the specific country treaty — often 10–15 %, not always full exemption. What happens if I miss deadlines? You may lose refunds, be penalized, or get interest on late payments. Are aggressive tax structures risky? Yes, GAAR or anti-avoidance rules may disallow them. What documents should I keep? TRC, foreign tax return/receipt, bank statements, investment proofs, passports, entry/exit stamps. 6/9

  7. Quick Checklist for NRIs to Avoid Double Taxation 1. Check your residential status under Indian law and treaty tie-breaker rules 2. Get a Tax Residency Certificate in your country of residence 3. File Form 10F and Form 67 if claiming credits 4. Compute foreign tax credit or exemption under DTAA 5. Ensure TDS is deducted at correct treaty rate 6. Pay advance tax if required 7. Structure investments wisely 8. Keep all documents and proof of foreign tax paid 9. Use expert help for audit, assurance, and compliance Conclusion Double taxation can seem scary—but it is avoidable. With the right combination of DTAA, foreign tax credit, correct residential status, and smart planning, NRIs can legally minimize their tax burden. But the key is accuracy, documentation, and professional guidance. JD Shah Associates is ready to help you at every step: from filing income tax declaration, navigating tax audit requirements, performing auditing & assurance, to advisory on structuring your foreign incomes. Visit our website on to explore how we can assist you. 7/9

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