Working for Indian company remotely from Dubai - Income tax implications

Is your employer Indian company or foreign company? If indian company, you may wish to check with them since if you are working in overseas jurisdiction as an employee of Indian Co, the Indian Company could have PE exposure in that overseas jurisdiction and consequently, there could be additional burden on them.

As far as relocating to overseas jurisdiction, you should check the Visa and immigration conditions.

Thirdly, though you are working outside India, a detailed analysis (once entire facts are understood in detail) is required to determine whether tax withholding in India is required or not

THank you for your reply. It's an Indian tech startup that does NOT have any office in Dubai. Can you expand "PE" for me? I tried googling but did not find the right results for "PE exposure"

Permanent Establishment 

Thank you. 

[quote]the Indian Company could have PE exposure in that overseas jurisdiction and consequently, there could be additional burden on them.
[/quote]

So, as I understand it, this is a risk from Dubai tax authorities rather than India. Am I right? 

I'll be going there as part of Dubai's "Virtual Working Programme" which is a visa granted to people looking to work remotely for their company in the home country. Also, given that Dubai has no income tax, am I right in assuming that the PE risk here is minimal? I'll anyway only be going there if I am granted the visa which is approved after they check  my pay receipts and application.

Yes. the tax exposure will be for the Indian Company in Dubai. You need to consult someone with Dubai Laws knowledge to get more information about this.

Some new updates:

We discussed with our employer and they said they do not have a problem with us working from Dubai since many other employees are already doing the same (and apparently they don't have any PE issues). 

I have a question on tax liability:

Since I have already lived more than 182 days this financial year in India, it's necessary for me to pay income tax this year.

However, if I work from Dubai and get paid in my Indian account - is that considered Indian income or foreign income? 

Let's say I move out of the country on November 1. 

My salary for Nov, Dec, Jan, Feb, Mar -> I will earn them when I am in Dubai. Would I be required to pay income tax on these earnings? 

The salary could be treated as deemed to accrue or arise in India and therefore taxable in India. Also, the income is received in India (since you salary is credited in your Indian account)

SINCE YOU STAYED MORE THAN 182 DAYS IN INDIA IN FY 21-22  THEN YOU ARE NOT NRI  FOR AY 22-23, ANY INCOME RECEIVED IN YOUR ACCOUNT IN INDIA IS TAXABLE INCLUDING WHAT YOU REMITTED FROM DUBAI IN THAT FY, BETTER YOY HOLD YOUR DUBAI INCOME AND REMIT IN FY 22-23. THEN YOU WILL PAY TAXES ON YOUR INDIAN INCOME ONLY, LIKE SOME NRI HAVE HIS FIXED DEPOSIT, THAT IS HIS INDIAN INCOME. 

YOUR INDIAN EMPLOYER MAY DIDUCT 20% TDS SINCE YOU ARE NRI IN FY 22-23. 

What is the TDs rate under Section 195 for an NRI?

A- The TDS rate under Section 195 ( Income in respect of investment made by a NRI) is 20%. However, there are other particulars under this section with different rates of TDS.

• For Non-Resident Indians: Only income earned or accrued in India or deemed to be so is taxable in India. Therefore, your income from any country besides India is not taxable in India.

• What is Income Earned or Accrued in India?

• Any salary received in India
• Any salary received for services rendered in India
• Rental income (if any) received from a property situated in India
• Capital gain (if any) arising on account of transfer of property or asset in India
• Any income from deposits in India such as interest on fixed deposits
• Any interest received on savings bank account, etc.

• Income from Salary:Your salary income will be taxed in India under two situations.

  Situation A: If it is received in India- If you are an NRI and you have received any salary in India directly into an Indian Account or somebody else has received it in your behalf in India, then such salary income would become taxable in India.

  Situation B: If it is earned in India- Your income is said to be earned in India if it is earned for services rendered in India. Therefore, if you are a NRI and your salary earned is for the services rendered in India, it shall be taxed in India.

  You will be taxed at the slab rate to which your income belongs to.

•  

Thanks so much Karina! How really timely I have come across your post, ma'am. I lost my job in Pune and can't find a new one. So perhaps I shall try your idea. Also have a family to care about.

Income tax on this income depends first on your residential status for FY 2025-26.

IF YOU ARE AN NRI (Non-Resident Indian) for that year (spent 182+ days outside India, or met the extended criteria under Section 6): India taxes you ONLY on income that accrues or arises in India, or is deemed to accrue in India.

For salary income, the key question under Section 9(1)(ii) is where you PERFORMED the services. If you were physically in Dubai while working, the income is considered to arise in Dubai, not India. It is generally NOT taxable in India even if the employer is an Indian company and the salary is credited to an Indian account.

IF YOU ARE A RESIDENT for that year: Your global income is taxable in India regardless of where services were performed.

FORM 16 AND TDS: Many Indian employers continue to deduct TDS even on NRI employees because they default to treating the employee as resident until told otherwise. If this applies to you, the corrective action is to submit a declaration to your employer about your NRI status before the financial year closes, so they adjust the TDS computation.

UAE NOTE: UAE has no income tax, and there is a DTAA between India and UAE. If you are an NRI and your income is taxed anywhere (which it is not in UAE), you can claim DTAA relief.

The income source rules and their practical impact are covered in detail here: [Section 9 income source rules for NRIs](https://taxgarden.in/blog/section-9-income-tax-act-income-deemed-accrue-arise-india-source-rules).