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TAX COMPARISON · INDIA ↔ UAE
India vs UAE corporate tax (2026): rates, treaty, what you actually save
The comparison Indian founders ask for is simple: 25% at home against 0% in a UAE free zone. The honest answer is close but not identical — the UAE taxes mainland profit at 9% above AED 375,000, the 0% free zone rate applies only to qualifying income with real substance, and India keeps claims on anyone who remains an Indian tax resident under the 1989 treaty.
This page puts both systems side by side with 2026 numbers, explains what the India–UAE DTAA actually does, and works the savings on realistic profit levels — plus the section most comparison pages skip: who this move does not work for.
Rates reviewed September 2026 methodology
Side by side
India vs UAE: the parameters
| Tax type | India | UAE mainland | UAE free zone |
|---|---|---|---|
| Corporate income tax | 25% (≈25.17% effective with surcharge + cess); 15% for new manufacturing under §115BAB | 9% above AED 375,000; 0% below | 0% on qualifying income* |
| Personal income tax | Progressive to 30% (effective up to ~42.7% with surcharge at top slabs) | 0% | 0% |
| GST / VAT | GST 0–28% by goods; 5/12/18/28 main slabs | VAT 5% | VAT 5% (registration over the mandatory threshold) |
| Withholding on dividends | 20% (treaty rate 10% in many cases) | 0% — no UAE withholding tax | 0% |
| Social contributions | EPF/ESI on employment income (employer share ~12–13%) | None (pension is voluntary/GRAVITY-free) | None |
| Filing & audit | Annual ITR + audit for companies; transfer pricing on related-party deals | Corporate tax registration + annual return | Corporate tax registration; QFZP substance test |
* 0% applies to the qualifying income of a Qualifying Free Zone Person — conditions in the caveats below.
The treaty
Double-tax treaty and residence
In force since 1989
The India–UAE Double Taxation Avoidance Agreement (1989) is one of the oldest treaties in the UAE's network and the backbone of corridor planning: it allocates taxing rights between residence and source states and caps withholding on dividends, interest and royalties in most flows.
The treaty helps only where your tax residence actually moves. India ties residence to 182 days and to a 'liable to tax' test that has tightened since 2020; the UAE grants tax residency at 183 days, or 90 days with a permanent home or work base. Where both countries can claim you, the treaty's tie-breaker and India's general anti-avoidance rules decide — adviser territory.
What you save
Worked on realistic profits
Worked savings at the headline rate — annual profit, converted to AED for comparability:
| Annual profit | Tax in India (25%) | UAE mainland (9% > 375k) | UAE free zone (qualifying) |
|---|---|---|---|
| AED 366,000 (≈ USD 100,000) | ≈ AED 91,500 | AED 0 — below the AED 375,000 threshold | AED 0 |
| AED 735,000 (≈ USD 200,000) | ≈ AED 183,750 | ≈ AED 32,400 | AED 0 |
| AED 1,835,000 (≈ USD 500,000) | ≈ AED 458,750 | ≈ AED 131,400 | AED 0 |
Simplified: India's effective rate rises above 25% with surcharge and cess at higher profits; UAE mainland math uses the 9% band over AED 375,000 only. Numbers are illustrative, not a tax computation.
Read before
Where the simple story breaks
Where the 'move to 0%' story breaks — read before, not after:
- If you stay an Indian tax resident, India taxes your worldwide income — a UAE company changes the entity, not your residence.
- The 0% free zone rate requires Qualifying Free Zone Person status: adequate substance, qualifying activities, audited accounts. Passive income from mainland UAE can fall outside it.
- India's place-of-effective-management rules and GAAR can still reach an Indian-run company incorporated elsewhere.
- Personal remittances out of India sit under FEMA/LRS with reporting; the funding route is a compliance decision, not a bank errand.
Informational content, not tax advice. Rates as of September 2026 — verify with an adviser before acting.
Frequently asked questions
Tax questions, answered
What is the corporate tax rate in India in 2026?
25% for domestic companies with turnover up to ₹400 crore — roughly 25.17% effective once surcharge and cess are added. New manufacturing companies under §115BAB carry a concessional 15%.
Can I avoid Indian corporate tax by opening a UAE company?
You cannot 'avoid' it — you replace it by moving residence, management and substance. Done properly (UAE tax residency, real operations, documented transfer pricing), the UAE charges 9% mainland or 0% qualifying free zone income instead of India's 25%. Done sloppily, both countries tax the same profit.
Does India have a tax treaty with the UAE?
Yes — in force since 1989, one of the UAE's oldest treaties. It caps withholding rates on dividends, interest and royalties and provides residency tie-breakers.
What is India's GST rate?
GST runs 0–28%: essentials at 0%, common goods at 5/12/18%, luxury and sin goods at 28%. The UAE's VAT is a flat 5%.
How much could an Indian business save in the UAE?
On AED 735,000 (≈ USD 200,000) of annual profit: roughly AED 183,750 of Indian corporate tax versus AED 0 as a qualifying free zone person, or about AED 32,400 on the mainland. The saving scales linearly with profit — and so do the compliance costs of doing it correctly.
Next step: the setup itself
Ready for the operational side — documents, banking timelines and zones Indian founders choose?