Most NRIs face the prospect of being taxed twice on Indian property income — once in India (where the property is located) and again in the country of residence (which generally taxes worldwide income). The Double Taxation Avoidance Agreement (DTAA) prevents this by allowing the country of residence to give credit for tax paid in India. But the mechanics differ by country and by type of income (rental vs. capital gains vs. interest).
This guide explains DTAA in practice for the major NRI countries.
What is DTAA and how does it apply to NRI Indian property?
DTAA (Double Taxation Avoidance Agreement) is a bilateral treaty between two countries that allocates taxing rights and prevents double taxation. India has DTAAs with 90+ countries.
For NRI property income, the relevant articles in most DTAAs are:
(1) Article 6 — Income from Immovable Property: rental income may be taxed in the country where property is situated (India for NRI Indian property).
(2) Article 13 — Capital Gains: gain from sale of immovable property may be taxed in the country where the property is situated (India).
(3) Article 23 / 25 — Method for Elimination of Double Taxation: how the country of residence gives credit for tax paid in the source country (India).
The principle: India taxes first as source country; the country of residence taxes the same income but allows credit for Indian tax paid.
How does foreign tax credit work in the USA for NRI Indian property income?
For Indian-origin individuals who are US tax residents (citizens or green card holders living in USA, or H1B/L1 holders with US residency status):
(1) Worldwide income is taxed by the IRS — including Indian rental, interest, dividends, capital gains.
(2) Indian tax paid (TDS, advance tax, ITR balance tax) is creditable against US tax on the same income — Form 1116 filed with Form 1040.
(3) Foreign tax credit limitation — credit cannot exceed the US tax that would otherwise apply on the same income; excess Indian tax is wasted (cannot be refunded by IRS, but can sometimes be carried forward or back).
(4) For Indian rental — declare gross rental as "Rents and Royalties" on Schedule E; deduct expenses allowed by US rules (which may differ from Indian rules); calculate US tax; claim credit for Indian tax paid via Form 1116 in the "passive" category.
(5) For Indian capital gains on property — long-term gain reported on Form 8949 and Schedule D; US LTCG rate (0/15/20%) applied; credit for Indian tax (typically 12.5% post-Budget 2024) via Form 1116. Often the Indian tax exceeds the US tax, leaving residual Indian credit that can be carried forward 10 years.
(6) Indian tax year (April-March) and US tax year (calendar) mismatch — track Indian tax paid in the calendar year corresponding to US tax year.
How does foreign tax credit work in the UK for NRI Indian property income?
For UK tax residents:
(1) UK taxes worldwide income (arising basis) for residents and domiciled individuals; "non-domiciled" residents on remittance basis pay UK tax only on income brought to UK (this regime is being phased out — review current rules).
(2) Indian rental income reported on Self Assessment Tax Return (SA106 supplementary form for Foreign income).
(3) Indian tax paid is creditable as Foreign Tax Credit Relief (FTCR) under Section 18(1)(c) ITTOIA; relief limited to the UK tax that would otherwise apply on the same income.
(4) Indian property capital gain — UK capital gains tax may apply; relief for Indian tax paid via FTCR.
(5) UK tax year is April 6 to April 5 (slightly offset from Indian financial year); reasonable timing matching is acceptable.
(6) The UK-India DTAA Article 6 covers rental; Article 13 covers capital gains; Article 23 provides for credit method.
How does foreign tax credit work in Canada for NRI Indian property income?
For Canadian tax residents:
(1) Canada taxes worldwide income; Indian rental and capital gains are reportable in CAD on T1 return.
(2) Indian rental — report on Form T776 (Statement of Real Estate Rentals) in CAD; foreign tax credit claimed on Schedule T2209 (Federal Foreign Tax Credit).
(3) Indian capital gains — report on Schedule 3; Indian tax claimed on T2209.
(4) Specified Foreign Property over CAD 100,000 must be declared on Form T1135 (separate from income reporting).
(5) Canada-India DTAA: Article 6 (rental immovable), Article 13 (capital gains), Article 23 (credit method).
(6) Canadian Foreign Tax Credit limited to Canadian tax on the same income; excess Indian tax may be deducted as expense in some cases or carried forward.
How does foreign tax credit work in Australia for NRI Indian property income?
For Australian tax residents:
(1) Australia taxes worldwide income on a calendar tax year basis (1 July to 30 June).
(2) Indian rental — declared as Foreign Income on tax return; Foreign Income Tax Offset (FITO) claimed under Division 770 ITAA. (3) Indian capital gains — declared on Capital Gains Tax schedule; FITO for Indian CGT paid.
(4) FITO is limited to Australian tax on the same income; if Indian tax exceeds Australian tax, the excess is generally lost (no carry forward).
(5) Australia-India DTAA: Article 6 (rental), Article 13 (capital gains), Article 23 (credit method).
(6) Australia includes more elements in capital gains computation than India — additional adjustments may be needed.
How does foreign tax credit work in UAE for NRI Indian property income?
UAE has NO personal income tax — for NRIs in UAE, only Indian tax applies on Indian property income.
(1) Rental income — taxed in India (Section 195 TDS, ITR filing); not taxed in UAE.
(2) Capital gains — taxed in India per Section 195/Lower TDS Certificate; not taxed in UAE.
(3) UAE-India DTAA Article 6, 13: similar source-country taxation rights; no UAE tax means no double taxation issue.
(4) From June 2023, UAE introduced Corporate Tax (9% on profits over AED 375,000) — applies only to UAE businesses, not individual rental/capital gains income.
(5) Practical implication: NRIs in UAE have the simplest cross-border tax situation — only Indian tax to manage.
(6) However, FATCA-CRS reporting still applies (UAE banks report to other jurisdictions if applicable; UAE residents are reported to India for any UAE accounts).
How does foreign tax credit work in Singapore for NRI Indian property income?
Singapore taxes its tax residents on Singapore-sourced income only — foreign-sourced income is GENERALLY not taxed (with conditions).
For NRIs in Singapore:
(1) Indian rental income received in Singapore — generally exempt under Section 13(8) ITA if the income is received from outside Singapore and certain conditions met (subject to remittance rules). (2) Indian capital gains — Singapore generally does not tax capital gains for individuals (no CGT regime); Indian tax paid is final.
(3) Singapore-India DTAA: Article 6, 13, 25.
(4) Singapore residency benefit — for individuals receiving foreign-sourced income, often no Singapore tax means Indian tax is the only tax, similar to UAE.
(5) However, ensure compliance with Singapore IRAS — declare foreign income even if exempt, claim exemption properly.
How does foreign tax credit work in Germany for NRI Indian property income?
For German tax residents:
(1) Germany taxes worldwide income (Welteinkommen) on a calendar tax year basis.
(2) Indian rental — declared on Anlage V (rental income) and Anlage AUS (foreign income) of Steuererklärung in EUR; tax credit under §34c EStG.
(3) Indian capital gains — declared on Anlage SO; tax credit under §34c.
(4) Germany-India DTAA Article 6 (rental), Article 13 (capital gains), Article 23 (credit method, in some categories exemption method). (5) Germany has a strict tax treaty with India — credit method applies, with credit limited to German tax on same income.
(6) German Solidaritätszuschlag (5.5% on income tax) applies on top — increases overall tax burden on Indian income that doesn't have surcharge offset.
(7) Engage a Steuerberater (tax advisor) familiar with Indian-German cross-border — Indian rental and capital gains computation differs from German rules and reconciliation is needed.
For complete details on selling property in India as an NRI and understanding the complete legal, tax, and repatriation process, visit our Selling Property in India page.