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How can NRIs avoid double taxation

How can NRIs avoid double taxation?

NRIs can avoid double taxation (meaning: getting taxed on the same income twice in the country of residence and India) by seeking relief from Double Tax Avoidance Agreement between the two countries.

Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method.

By exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.

NRI recently moved back to India

Returning NRIs assume RNOR status when:

    • You have been an NRI in 9 of the 10 financial years preceding the year of your return

OR

  • You have lived in India for 2 years or less (729 days or less) in the last 7 financial years

The I-T Department allows RNORs to continue to enjoy exemptions available to NRIs for a period of 2 years after their return. Therefore, deposits held in foreign currency, which are exempt for an NRI, shall be exempt to returning NRIs for 2 years.

After these 2 years, returning NRIs are treated as resident individuals.

How can NRIs avoid double taxation?

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