UAE-Based Indians Could Face Wider Tax Net Under India’s New Rules

Indian expatriates and business owners living in the United Arab Emirates (UAE) are reassessing their tax status under India’s new tax rules. This change mainly affects those with income, assets or businesses connected to India.

The people, who are residing in Dubai with businesses, investments, or other assets outside India, will have their tax liability depend on whether India classifies them as non-residents (NR), resident but not ordinarily residents (RNOR), or residents and ordinarily residents (ROR).

Under the new Income Tax Act, 2025, residential status rules started applying from April 1, 2026. It determines whether foreign income falls within India’s tax system.

NRs are usually taxable in India only if the income has been received or earned in India. RORs can be taxed based on their total world income, while RNORs receive more limited treatment. However, foreign income from a business controlled from India may still be taxable.

These provisions are  important for Indian businessmen based in Dubai who spend considerable time in India. These are applicable to those making frequent visits to India from Dubai and the UAE. The days spent by individuals in India can affect their residential status.

The new framework does not mean that every Indian living in Dubai will have to pay tax in India on all foreign income. It will depend on the individual’s residential status and their sources of income.

Foreign companies can also be subjected to investigation if their key management and business decision-making processes take place in India.

It is also mandatory for Indian residents to disclose certain foreign assets and incomes in their tax returns. The Income Tax Department of the country has increased the obligation of disclosure in respect of foreign financial assets.

For UAE-based Indians, it is important to maintain records of their presence in India, foreign incomes and investments.