Taxability of salaries received in UAE

Taxability of individuals mainly depends upon their residential status and place of accrual/receipt of income. Indian income is taxable for all three categories of individuals:

R and OR
R but not OR
NR

However foreign income is taxable only in the hands of R and OR. Assuming an R and OR for a particular financial year goes to UAE for taking up an employment in a company incorporated in UAE. As per section 5 and section 9 of the income tax act the same is taxable in India. But India – UAE treaty also needs to be taken into account. As per the treaty remuneration received in UAE is taxable in India only if all the conditions stated below are satisfied:

The individual stays in UAE for a period less than 183 days AND
Remuneration is paid by a company which does not have a PE / fixed base in UAE and
Remuneration is paid by or on behalf of a company which is not a resident of UAE
As per CIT vs. Kulandangan Chettiar (SC 2004) DTAA prevails over the act.

Hence the salaries of employees who leave India for taking up employment in UAE based companies can take advantage of DTAA and their salaries will not be taxable under the Indian Income tax act. However they have to file their return of income and claim relief under section 90 of the act.