Moving to Dubai to save on taxes? Here's when you can legally skip paying tax in India
Dubai’s 0% income tax is luring many Indian freelancers, founders, and professionals. But shifting abroad doesn’t automatically exempt you from Indian taxes. Here’s when your income actually becomes tax-free.
- Jul 25, 2025,
- Updated Jul 25, 2025 8:14 PM IST
Dubai and Abu Dhabi have emerged as the world’s most tax-friendly cities in 2025, according to the Multipolitan Index, which ranks cities based on tax laws, governance, and legal structures. With seven Gulf Cooperation Council (GCC) cities in the global top 20, the UAE has positioned itself as a prime destination for global wealth and tax-efficient living.
At the core of the UAE’s appeal is its 0% personal income tax. Coupled with strong legal infrastructure and lifestyle perks, Dubai has become a magnet for freelancers, startup founders, and HNIs—including many from India—looking to legally reduce their tax burden. But can relocating to Dubai really help you escape Indian taxes? Not unless you tick all the legal boxes.
Breaking Indian tax residency
According to tax advisory platform TaxBuddy, merely shifting to Dubai isn’t enough. To legally avoid Indian income tax, you must break your Indian tax residency.
Under Indian tax laws, you are considered a Non-Resident Indian (NRI) only if:
You spend 183+ days outside India in a financial year,
Or, stay less than 60 days in India this year and less than 365 days in the past four years,
Or, hold foreign residency and earn under Rs 15 lakh in Indian income during the year.
If you don’t meet any of these, you're treated as an Indian tax resident, and your global income, including Dubai salary or profits, becomes taxable in India.
Source of income still matters
Even if you qualify as an NRI, you’re not fully off the hook. What matters next is the source of your income. If you:
Earn from Indian clients
Perform work while physically in India
Receive payments into Indian accounts
Earn from Indian assets (rent, FDs, dividends, etc.)
— Those incomes are still taxable in India, regardless of your residency.
What if you start a company in Dubai?
Many Indian founders register companies in Dubai and pay themselves a tax-free salary. However, if the company is effectively managed from India, it may be classified as an Indian tax resident under the POEM (Place of Effective Management) rule.
That means the entire income of the Dubai company can be taxed in India. Managing operations from India—even virtually—can trigger this clause.
India vs Dubai: Key tax differences
India: Taxes based on residency. Residents are taxed on global income. NRIs are taxed only on Indian income.
Dubai: 0% personal income tax, no capital gains tax, and no inheritance tax.
Can you avoid Indian tax by moving to Dubai?
Yes—but only if:
> You qualify as an NRI under Indian tax law > Your income is earned and received outside India > You don’t manage or control business activities from India
In short, Dubai offers real tax advantages, but only to those who fully sever tax ties with India. Half-measures or poorly planned relocations could leave you facing the taxman on both fronts.
Dubai and Abu Dhabi have emerged as the world’s most tax-friendly cities in 2025, according to the Multipolitan Index, which ranks cities based on tax laws, governance, and legal structures. With seven Gulf Cooperation Council (GCC) cities in the global top 20, the UAE has positioned itself as a prime destination for global wealth and tax-efficient living.
At the core of the UAE’s appeal is its 0% personal income tax. Coupled with strong legal infrastructure and lifestyle perks, Dubai has become a magnet for freelancers, startup founders, and HNIs—including many from India—looking to legally reduce their tax burden. But can relocating to Dubai really help you escape Indian taxes? Not unless you tick all the legal boxes.
Breaking Indian tax residency
According to tax advisory platform TaxBuddy, merely shifting to Dubai isn’t enough. To legally avoid Indian income tax, you must break your Indian tax residency.
Under Indian tax laws, you are considered a Non-Resident Indian (NRI) only if:
You spend 183+ days outside India in a financial year,
Or, stay less than 60 days in India this year and less than 365 days in the past four years,
Or, hold foreign residency and earn under Rs 15 lakh in Indian income during the year.
If you don’t meet any of these, you're treated as an Indian tax resident, and your global income, including Dubai salary or profits, becomes taxable in India.
Source of income still matters
Even if you qualify as an NRI, you’re not fully off the hook. What matters next is the source of your income. If you:
Earn from Indian clients
Perform work while physically in India
Receive payments into Indian accounts
Earn from Indian assets (rent, FDs, dividends, etc.)
— Those incomes are still taxable in India, regardless of your residency.
What if you start a company in Dubai?
Many Indian founders register companies in Dubai and pay themselves a tax-free salary. However, if the company is effectively managed from India, it may be classified as an Indian tax resident under the POEM (Place of Effective Management) rule.
That means the entire income of the Dubai company can be taxed in India. Managing operations from India—even virtually—can trigger this clause.
India vs Dubai: Key tax differences
India: Taxes based on residency. Residents are taxed on global income. NRIs are taxed only on Indian income.
Dubai: 0% personal income tax, no capital gains tax, and no inheritance tax.
Can you avoid Indian tax by moving to Dubai?
Yes—but only if:
> You qualify as an NRI under Indian tax law > Your income is earned and received outside India > You don’t manage or control business activities from India
In short, Dubai offers real tax advantages, but only to those who fully sever tax ties with India. Half-measures or poorly planned relocations could leave you facing the taxman on both fronts.