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

Indian expatriates and business owners living abroad will now face new tax rules as India is expanding its taxation of global income. Eligible taxpayers need to disclose their income and assets that were not reported earlier until December 31.

Those declaring previous undisclosed foreign income or assets worth up to ₹1 crore (approximately US$113,600) or less will have to pay a tax of 30 percent. They will also face a penalty equal to the tax amount, raising their total liability.

The recent changes have also led to raised questions among business owners about how their Dubai-based and other foreign investments could be affected by the new disclosures and tax requirements.

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.

Non-residents are usually taxable in India only if the income has been received or earned in India. However, foreign income from a business controlled from India may still be taxable.

Especially for Indian entrepreneurs running businesses in Dubai, who hold an Indian passport and have Dubai residency, India’s changing tax rules are becoming increasingly important.

Having Dubai residency does not automatically remove their tax and reporting obligations in India. Depending on their residential status and circumstances, they may still have to file tax returns and report their applicable income and assets to Indian authorities.

And if they fail to comply with these requirements, it can create complications later. For example, when renewing an Indian passport in Dubai, they may, in certain circumstances, be required to obtain an NOC from the Indian tax authorities.

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.