NRI Taxation in Kuwait, Bahrain and Qatar: No DTAA, No Relief, and What You Can Still Do

A Kuwaiti-based Indian professional called me after receiving a TDS certificate showing Rs 1,56,000 deducted on his NRO deposit interest of Rs 5,00,000. He wanted to know which treaty article to invoke to get the rate down. The answer I had to give him was uncomfortable: there is no article to invoke, because there is no treaty. He had been in Kuwait for nine years, carefully maintaining his NRI status, filing Indian returns every year, and he had never once been told that his country of residence puts him at a structural disadvantage on Indian taxes compared to a colleague sitting in Dubai.

That disadvantage is real, significant and almost entirely unknown to the NRIs it affects. India has negotiated DTAAs with over 90 countries, including two of Kuwait's Gulf neighbours: the UAE and Saudi Arabia. Kuwait, Bahrain and Qatar remain outside that network. (Oman does have a limited DTAA with India, so Oman-based NRIs have at least partial coverage; the gap countries are Kuwait, Bahrain and Qatar.) For the hundreds of thousands of Indian professionals in these three countries, the standard domestic rates apply in full, with no treaty ceiling, no exemption clause and no formal double-tax relief mechanism.

The 30-second answer: NRIs living in Kuwait, Bahrain or Qatar have no Double Taxation Avoidance Agreement with India. This means no reduced withholding rate on NRO interest (the full 31.2% applies), no capital gains treaty clause, and no Section 91 credit because these countries levy little or no personal income tax, so there is nothing to credit. You pay India's full statutory rates: 12.5% LTCG on equity above the Rs 1.25 lakh threshold, 20% LTCG on property, 30% on NRO FD interest plus surcharge and cess. The only tools available are structural: NRE over NRO, the annual equity exemption, a Section 197 lower-TDS certificate, and clean documentation of your non-resident status. None of these replaces a treaty, but together they cut the damage.

This guide does not assume you know the DTAA mechanics in depth. It will cover exactly what you lose by the absence of a treaty, how each income stream is taxed, why Section 91 is a dead letter for most Kuwait and Bahrain NRIs, what you can actually do to reduce the bill within the domestic law framework, and a worked example that shows the full computation for a Kuwait-resident NRI across three income streams.

What a DTAA does, and what you lose without one

A DTAA between two countries does three jobs that matter to NRIs. First, it caps the rate at which the source country (India) can withhold tax on income remitted to a non-resident. On NRO interest, for example, the India-UAE treaty caps India's right to deduct at 12.5 per cent rather than the domestic 30 per cent plus cess. Second, it assigns exclusive taxing rights on certain income types. Under many treaties, capital gains on movable property fall only to the residence country, which for a UAE or Singapore resident often means zero tax in both places. Third, it provides a credit mechanism so that the residence country acknowledges the Indian tax already paid and does not charge its own tax on top in full.

Without any of these three mechanisms, an NRI in Kuwait, Bahrain or Qatar faces:

Full Indian TDS on NRO interest at 30% plus 4% cess, approximately 31.2%, before surcharge. For an NRI with total Indian income above Rs 50 lakh, a 10% surcharge applies, pushing the effective rate to 34.32%, and above Rs 1 crore a 15% surcharge applies.

No treaty-based exemption or assignment on capital gains. Equity LTCG follows Section 115AD: gains above Rs 1.25 lakh taxed at 12.5% (no indexation allowed). Equity STCG at 20%. Debt fund gains at applicable slab rates (after the April 2023 change removing indexation and LTCG classification for new debt fund investments).

No assigned taxing right on rental income. Indian rental income is taxable in India at slab rates, with a 30% standard deduction on gross rent and municipal taxes allowed. An NRI in the UK can credit the Indian tax against UK tax. A Kuwait NRI cannot; there is simply no UK-type second country charging a competing tax and providing relief.

No claim under Section 90, which is the domestic provision that gives legal effect to DTAA benefits. Section 90 only operates when a treaty exists. Without one, you fall back to Section 91, and the conditions for Section 91 do not help most Gulf NRIs, as explained next.

Why Section 91 is a dead letter for Kuwait and Bahrain NRIs

Section 91 provides unilateral relief where no treaty exists. The computation is: calculate the average Indian tax rate on the income, calculate the average foreign tax rate on the same income, and take the lower of the two as the relief. Deduct that relief from the Indian tax due. In theory, this prevents genuine double taxation even without a treaty.

The fundamental problem is the word "foreign tax rate." Section 91 only gives relief on income that has been taxed in both countries. It cannot create relief where no foreign tax exists. Kuwait has no personal income tax law. Bahrain has no personal income tax law. Qatar has a personal income tax law in principle, but the tax-free threshold under Qatari law covers almost all Indian expatriate employees in practice, so their effective Qatari tax rate on employment income is zero.

Run the Section 91 formula on NRO interest for a Kuwait NRI. Indian tax rate: 30% (plus cess). Foreign (Kuwait) tax rate on the same income: 0%. Relief is the lower of the two: 0%. The NRI pays 31.2% to India and receives zero credit. Section 91 produces exactly the same result as having no relief provision at all.

This is the structural disadvantage. It is not a bureaucratic oversight or a filing error; it is a direct consequence of living in a no-income-tax jurisdiction without the treaty that UAE NRIs have. The UAE DTAA caps India's withholding at 12.5% on interest precisely because both sides agreed to it. Kuwait has not agreed to anything, and Kuwait's domestic law has no income tax to create a mechanical floor under Section 91.

The only Qatar nuance worth noting: if a Qatar-based NRI genuinely pays Qatari income tax (the law does provide for it in some circumstances, and certain employees in state-linked entities can be subject to it), they have a Section 91 argument. But for most Indian expats on private-sector employment contracts in Qatar, the practical tax rate is zero and Section 91 is unavailable.

How Indian income is actually taxed for a no-treaty Gulf NRI

NRO fixed deposit interest

Interest on an NRO account is Indian-source income. The bank deducts TDS under Section 195 at 30% plus cess, approximately 31.2% for NRIs. There is no DTAA to override this. The TDS is final for many NRIs who do not file, but if you file an ITR-2 (which you should, to claim any excess), the interest forms part of your total Indian income and is taxed at slab rates. For most NRIs with modest Indian income, the 31.2% TDS rate broadly mirrors their actual liability, but higher earners should be aware of surcharge exposure.

One specific comparison: a Dubai-based NRI with the same NRO deposit pays TDS at 12.5% under the India-UAE treaty (with TRC and Form 10F in place). The Kuwait NRI pays 31.2%. On Rs 5,00,000 of interest, that gap is Rs 92,500 per year, purely because of the treaty position.

Equity capital gains

Under Section 115AD, a non-resident's capital gains from Indian listed securities follow these rates:

• Short-term capital gains (STCG): 20% (post-July 2024 Budget change, up from 15%)
• Long-term capital gains (LTCG, equity): 12.5% on gains above Rs 1.25 lakh per financial year (post-July 2024 Budget, threshold raised from Rs 1 lakh)

No indexation is available to NRIs on equity gains. No treaty reduces these rates for a Kuwait or Bahrain NRI. The Rs 1.25 lakh annual LTCG exemption under Section 112A is available and should be actively used, by harvesting gains near year-end if the portfolio has appreciated without crossing the threshold.

Capital gains on property

Long-term gains on Indian immovable property (held over 24 months) are taxed at 20% with indexation (or 12.5% without indexation post-Budget 2024, whichever applies to your purchase date and election). The buyer is required to deduct TDS at 20% of the sale consideration under Section 195 for NRI sellers (not just on the gains component). Recovering excess TDS requires a lower-deduction certificate obtained before the sale closes. This is always a structuring priority for an NRI property sale, treaty or no treaty.

Rental income

Indian rental income is taxable in India at slab rates after a 30% standard deduction on gross rent (Section 24(a)) and deduction for municipal taxes actually paid. Tenants paying NRI landlords must deduct TDS at 30% plus cess under Section 195. Many tenants, particularly residential tenants, do not do this properly, which creates a compliance risk for the NRI landlord. The rental income is included in the NRI's ITR-2, the TDS is credited, and any balance is paid or refunded.

Dividends

Post-2020, dividends from Indian companies are taxable in shareholders' hands. For NRIs, the TDS rate under domestic law is 20% plus cess. No treaty rate is available for Kuwait or Bahrain NRIs. The dividend is included in total income and taxed at slab rates, with TDS credited.

Worked example: Kuwait NRI with three income streams

Take Suresh, resident in Kuwait for eleven years, clearly an NRI under Section 6. His Indian income in FY 2025-26 comprises:

• NRO fixed deposit interest: Rs 5,00,000
• Indian rental income (gross rent Rs 5,00,000 per annum): Rs 3,50,000 after 30% standard deduction
• Long-term capital gains on Indian equity mutual funds: Rs 2,00,000

He has no treaty. No TRC. No Form 10F (there is no treaty to invoke). Here is the computation.

Step 1: Compute taxable income

Interest income: Rs 5,00,000 Rental income (after 30% standard deduction): Rs 3,50,000 LTCG on equity mutual funds (Section 115AD / 112A): Rs 2,00,000, but first Rs 1,25,000 is exempt, so taxable LTCG is Rs 75,000.

For slab computation: Rs 5,00,000 (interest) + Rs 3,50,000 (rental) = Rs 8,50,000 ordinary income.

Step 2: Tax on ordinary income (slab rates for AY 2026-27 under new regime)

Under the new default tax regime:

• Up to Rs 3,00,000: nil
• Rs 3,00,001 to Rs 7,00,000: 5% on Rs 4,00,000 = Rs 20,000
• Rs 7,00,001 to Rs 10,00,000: 10% on Rs 1,50,000 = Rs 15,000

Tax on ordinary income: Rs 35,000

Note: NRIs cannot claim the standard deduction of Rs 75,000 under the new regime (that is for resident salaried individuals). The rebate under Section 87A is also not available to NRIs.

Step 3: Tax on LTCG

Taxable LTCG: Rs 75,000 Tax at 12.5% under Section 112A: Rs 75,000 x 12.5% = Rs 9,375

Step 4: Health and Education Cess

Total tax before cess: Rs 35,000 + Rs 9,375 = Rs 44,375 Cess at 4%: Rs 1,775

Step 5: Total tax liability

Total tax: Rs 44,375 + Rs 1,775 = Rs 46,150

Step 6: TDS already deducted

NRO FD interest: 31.2% on Rs 5,00,000 = Rs 1,56,000 (already withheld by bank) Rental income: tenant should have deducted TDS at 31.2% on Rs 5,00,000 gross = Rs 1,56,000, but assume partial compliance, say Rs 80,000 actually deducted. Equity LTCG: Rs 0 deducted (assume mutual fund house applied the Rs 1.25 lakh exemption at source).

Total TDS deducted: Rs 1,56,000 + Rs 80,000 = Rs 2,36,000

Step 7: Refund

Tax liability: Rs 46,150 TDS deducted: Rs 2,36,000 Refund due: Rs 1,89,850

This is the other face of the no-treaty problem. The TDS regime wildly over-deducts relative to actual liability, because it applies 31.2% to gross income without accounting for the standard deduction, the lower slab rates, or the equity exemption. The over-deduction is recoverable by filing an ITR-2, but the cash is locked up for months, sometimes over a year, while the refund is processed. The UAE-based equivalent of Suresh can recover the over-deduction far faster because the treaty TDS rates are more accurate to begin with.

Now compare Suresh's position to a notional Dubai-resident NRI with identical income. On the NRO interest alone, the Dubai NRI would have been deducted at 12.5% (Rs 62,500) rather than 31.2% (Rs 1,56,000). That single difference means the Dubai NRI has Rs 93,500 more cash in hand during the year, interest-free, that he does not have to wait for a refund to recover. Over a decade, the compounding difference in cash timing is itself a material sum.

The residency documentation that matters more without a treaty

One thing that does not change by the absence of a treaty is the importance of proving you are actually a non-resident. In fact, it matters more, because without a treaty you have no alternative line of defence if the Income Tax Department questions your residency status.

The key document is the Foreign Inward Remittance Certificate (FIRC) or equivalent bank acknowledgement for any money you bring into India. Beyond FIRC, the residency proof stack should include:

Passport with entry and exit stamps showing you have not breached the 182-day or 60-day tests under Section 6. NRIs frequently visit India and may unknowingly accumulate days if they extend trips. The rules are covered in detail in the NRI residency and RNOR rules guide, and the trigger dates where a long India visit converts your status are worth reviewing before every trip.

Employment contract or work permit from the Gulf country showing you are based there.

Bank statements from the Gulf country showing salary credits and local economic activity, which establish economic presence and buttress the residency claim.

PAN card maintained and linked to Aadhaar. Without a PAN, Section 206AA pushes TDS to 20% or the applicable rate, whichever is higher, which in practice means higher deductions and worse refund positions. Get and maintain a PAN regardless of whether you file annually.

Without a treaty, the Income Tax Department has no treaty-level obligation to accept your residency claim. Any notice questioning your Section 6 status needs to be answered with facts and documents, not treaty language.

The Section 197 lower-TDS certificate: the only treaty substitute

Since no treaty rate is available, the only mechanism to reduce TDS below the standard 31.2% is a Section 197 lower-deduction certificate applied for on Form 13 before income is credited. This applies to NRO interest, rental income, and property sale proceeds.

The application goes to the jurisdictional TDS officer (the AO having jurisdiction over the deductor, typically the bank branch or the tenant's city). You submit a projection of your total Indian income for the year, your expected deductions, and your estimated tax liability, demonstrating that applying 30% TDS would result in a tax deduction materially in excess of your actual liability. If the officer is satisfied, they issue a certificate specifying a lower rate, which you then give to the deductor.

A certificate on NRO interest is particularly valuable. If Suresh's computation above shows an actual effective rate of around 5-6% on total income (given the slab structure), he may get a certificate directing the bank to deduct at that rate rather than 31.2%. That transforms the refund situation: instead of waiting twelve months to recover Rs 1,89,850, he collects his interest at close to the actual rate during the year.

The limitations are real. The certificate is not automatic; the AO has discretion. It is issued for a specific financial year and must be renewed annually. It does not help on dividends, where the TDS mechanism is different. And it is no substitute for the treaty rate cap that UAE NRIs get simply by filing a TRC and Form 10F with their bank. The mechanics are in the Form 13 lower-TDS certificate guide.

Structuring choices that reduce the damage

The absence of a treaty does not mean the situation is unmanageable. It means you have to use structural tools rather than treaty claims. The most impactful:

Maximise NRE over NRO. Interest on NRE fixed deposits and savings accounts is exempt in India while you are a non-resident (Section 10(4)). This exemption exists under domestic Indian law and requires no treaty. Every rupee of savings that you can keep or route through an NRE account earns Indian interest tax-free. The constraint is that only foreign earnings can fund NRE accounts; income arising in India cannot be directly credited there. But for a Gulf NRI who earns salary abroad, there is typically no reason to park new foreign-source savings in an NRO account at all. The NRE/NRO/FCNR guide covers the credit restrictions in detail.

Use the Rs 1.25 lakh LTCG equity exemption annually. Section 112A provides an annual Rs 1.25 lakh exemption on equity LTCG. For a Kuwait NRI with a meaningful Indian equity portfolio, a systematic approach of booking long-term gains up to Rs 1.25 lakh per financial year (and resetting the cost basis) over time eliminates tax on a large quantum of equity appreciation. This requires some portfolio-level tracking but no treaty. In Suresh's example, his Rs 2,00,000 of LTCG was reduced to Rs 75,000 of taxable gain by this exemption alone.

Time property sales with indexation and a lower-deduction certificate. If you plan to sell Indian property, apply for a lower-deduction certificate on Form 13 before closing, and work with a CA to calculate indexed cost correctly. The buyer must deduct TDS at 20% of the sale consideration (not 20% of the gain) under Section 195, which creates dramatic over-deduction on properties with large unrealised gains. A well-documented certificate compresses this considerably.

File ITR-2 every year, even if you expect a refund. The tax department has been tightening scrutiny on NRI accounts with large TDS credits and no return. Filing an ITR-2 brings the refund, keeps your PAN status clean, and avoids notices. The process and form is explained in the NRI ITR-2 filing guide. NRIs who do not file and leave large TDS balances unclaimed are increasingly receiving tax notices under Section 143(1) and Section 148.

Watch the advance tax calendar. If your Indian income from rent or capital gains is significant and TDS does not cover your full liability, quarterly advance tax payments are mandatory (15 June, 15 September, 15 December, 15 March). Non-payment attracts interest under Sections 234B and 234C. This is common for NRI property landlords whose tenants under-deduct. The advance tax guide for NRIs and the tax calendar cover this.

What to do if you receive a tax notice

Gulf NRIs with large TDS credits and no filed returns are a common target for income tax notices. The notices that arrive most often are under Section 143(1) (processing mismatches, typically between TDS credits in Form 26AS and the absence of a return), Section 139(9) (defective return), and occasionally Section 148 (reassessment where the officer believes income has escaped assessment).

Without a treaty, you cannot point to a treaty position as a reason for a lower tax rate. Every response to a notice must be factually grounded in: your residency status under Section 6 (with documentation), the correct computation of income after exemptions and deductions, and the TDS credit reconciliation from Form 26AS and AIS. The guide on responding to NRI tax notices covers this in detail.

One process point: if you receive a notice and have an outstanding refund from excess TDS, the department may set off the refund against any assessed demand before paying it. This is standard procedure and not a penalty, but it means the refund you were counting on can disappear into a disputed demand, making it even more important to resolve notices promptly.

The DTAA landscape for Gulf countries in 2026

For context, here is the current state of India's treaty network in the Gulf:

UAE: Full DTAA in force since 1993, amended by 2007 protocol. Covers interest (capped at 12.5%), capital gains (Article 13 residual clause protects mutual fund unit gains for UAE residents), dividends (10%). Most comprehensive and valuable treaty for Gulf NRIs.

Saudi Arabia: DTAA in force. Provides rate caps and credit mechanisms, though the treaty is less generous than the India-UAE treaty on some income types.

Oman: A limited DTAA exists between India and Oman. Oman-based NRIs have some treaty coverage, though the scope is narrower than UAE. Oman-resident NRIs should verify specific article coverage with a CA rather than assuming the same protections as UAE.

Kuwait: No DTAA. No treaty negotiations publicly announced as of May 2026.

Bahrain: No DTAA. Bahrain is a major financial centre with significant Indian population; no treaty is in force.

Qatar: No DTAA. Qatar hosted significant Indian labour through the World Cup construction period; no treaty has resulted from this economic relationship.

The absence of treaties with Kuwait, Bahrain and Qatar is not an accident. India prioritises treaty negotiations where the economic case is strongest and where the other country's tax system creates genuine double-taxation risk. Where a country has no income tax, the double-taxation problem that treaties solve largely does not exist in the conventional sense. The problem for NRIs is that while there is no double-taxation, there is also no relief from Indian rates, which is a different and worse problem for someone with significant Indian assets.

The closing read

The core fact to carry forward is this: if you are an Indian professional resident in Kuwait, Bahrain or Qatar, you pay India's full domestic tax rates on every rupee of Indian-source income, and there is no treaty to change that. Your colleague in Dubai gets NRO interest taxed at 12.5%. You pay 31.2%. Your colleague's mutual fund gains may be zero-taxed under the India-UAE treaty. Yours are taxed at 12.5% above Rs 1.25 lakh. The structural tools that exist within Indian law (NRE accounts, the annual LTCG exemption, Form 13 lower-TDS certificates, and disciplined ITR-2 filing) do real work and should all be deployed. But none of them replaces a treaty, and no one should pretend otherwise.

The most expensive mistake Gulf NRIs make in the no-treaty countries is doing nothing: leaving money in NRO accounts when it could be in NRE accounts, not filing returns and losing refunds, not applying for lower-TDS certificates, and not taking the equity LTCG exemption systematically. The second most expensive mistake is assuming that a treaty exists or will soon exist. Verify the current status with a CA every year before making decisions; the DTAA register does change, and if India and Kuwait sign a treaty, the entire analysis above changes the day it enters into force.

File your ITR-2. Apply for Form 13 if your income is significant. Keep your NRE account primary. Document your residency every year. And if someone tells you there is a treaty with Kuwait, ask them to show you the notification in the Official Gazette.

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Related guides

• NRI Residency and RNOR Rules
• ITR Filing for NRIs: AY 2026-27
• PAN Card for NRIs
• TDS for NRIs and Refunds
• DTAA Relief for NRIs: How It Works
• DTAA Mechanics: TRC and Form 10F
• Capital Gains Tax for NRIs: Shares and Mutual Funds
• Tax on NRO Interest
• Tax on Indian Rental Income for NRIs
• Advance Tax for NRIs
• NRI Tax Calendar 2026: Key Dates
• Lower TDS Certificate: Form 13
• Responding to NRI Tax Notices
• Foreign Tax Credit: Form 67
• NRE, NRO and FCNR Accounts Explained
• Reducing NRO TDS with the DTAA

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This article is for general information only and does not constitute tax advice. Tax laws change; verify current rates and DTAA status with a qualified chartered accountant before filing. NRI taxation involves both Indian and foreign tax considerations that depend on individual circumstances. The DTAA position for any country should be verified directly with the income tax department or a tax professional.