Does China tax your Indian income in your first six years?
Not while an Indian payer pays it. China sorts foreign residents by how long they have lived there. Under the six-year rule, a non-domiciled individual is taxed on foreign income only to the extent it is paid or borne by a Chinese entity or individual, until they have completed six straight years as a resident. Your Indian FD interest, dividends, rent and capital gains are paid by Indian banks, companies and tenants, so they are foreign-source and stay outside the Chinese net during those years.
This is not a remittance shelter. Korea, Japan and Thailand tax a newcomer's foreign income once it is brought into the country, so keeping the money abroad is the trick there. China is different: what matters is who pays the income and how long you have been resident, not whether you remit. So your Indian income can sit in your Chinese bank account and still be outside Chinese tax during the window, as long as it was paid by an Indian payer. The contrast is worth knowing, because the same shelter in South Korea works on remittance instead.
The six-year clock, and the 30-day trip that resets it
The shelter ends only when you have been a China resident for six straight years with no break. In full, China taxes your worldwide income from the seventh year, but only if in each of the prior six years you spent 183 days or more in China and did not leave on a single trip of more than 30 consecutive days. Miss the 183 days in any year, or take one trip abroad longer than 30 days, and the six-year count resets to zero.
That reset is the planning lever. A single trip out of China of more than 30 consecutive days, an extended home visit to India, for instance, in any year restarts the clock, so a non-domiciled resident can keep the foreign-income shelter running for a long time with the right travel pattern. The count only started on 1 Jan 2019, so the earliest anyone can be pushed onto worldwide taxation is tax year 2025. Work out your own six-year line, and time both your travel and any big Indian sales around it.
After six years, China taxes your Indian income worldwide
Once you complete six straight years without a reset, the shelter ends and China taxes your worldwide income from the seventh year. From that point your Indian interest, dividends, rent and gains are taxable in China whoever pays them. China's comprehensive income, mainly salary, is taxed on a progressive scale that tops out at 45 percent, but Indian interest, dividends and capital gains fall into a separate category taxed at a flat 20 percent, so that is the rate that usually matters for your Indian income.
Where China does tax an Indian item after the window, the India-China treaty lets China credit the Indian tax you already paid under Article 23, so you are not taxed twice on the same rupee. The one gap is NRE interest: India exempts it, so there is no Indian tax to credit, and once China taxes it after year six it is taxed in China in full. That makes the years inside the six-year window the cheap time to realise Indian gains and draw Indian income, because China does not reach them at all while an Indian payer pays them.
The India side: treaty rate now, Chinese credit later
India taxes your Indian income regardless of where you live, so this half is always in play. When an Indian payer credits you interest, dividends or rent, or a fund house redeems your units, tax is deducted under Section 195, which becomes Section 393(2) from FY 2026-27. You bring it down to the treaty rate with a Tax Residency Certificate from the Chinese tax authority and Form 10F, which becomes Form 41 from FY 2026-27: interest to 10 percent under Article 11, dividends to 10 percent under Article 10. Anything over-deducted comes back through your Indian return.
Where China does tax an item, once you are past six years, the treaty lets China credit the Indian tax you already paid under Article 23, so the same income is not taxed twice. But a credit only refunds up to the Chinese tax on that income, so if India over-deducts above the treaty rate, that excess is money you recover in India, not in China. That is why filing the TRC and Form 10F to cap the Indian deduction at 10 percent from the start is the step that actually saves money.
Selling Indian shares, funds or property from China
Capital gains follow their own rules, and the asset type decides the Indian tax. On Indian listed shares and equity mutual funds, a long-term gain is taxed under Section 112A at 12.5 percent with no indexation, on the gain above Rs 1.25 lakh in the year, for sales on or after 23 July 2024. The India-China treaty keeps the taxing right on those gains with India: Article 13 lets India tax gains on Indian shares and on Indian immovable property, so you cannot move the gain to China to escape it.
Selling Indian property is where timing pays most. The buyer must withhold TDS on the full sale price under Section 195, not on the gain, so a large amount of cash is trapped until you file your return. A lower-deduction certificate, Form 13 under Section 197, which becomes Form 128 under Section 395 from FY 2026-27, brings the withholding down to the real tax on the gain before completion. Inside the six-year window China does not tax the gain at all, since the buyer is an Indian payer, so realising Indian gains before you cross six years keeps China out of them entirely.
A worked example: Arjun's Shenzhen years
Arjun, 36, is a hardware engineer in Shenzhen, three years into his posting, so well inside the six-year window and travelling home to India for over 30 days most winters, which keeps resetting his count. He holds a ₹45 lakh NRO fixed deposit paying 7 percent, about ₹3.15 lakh of interest a year.
Because the interest is paid by an Indian bank, it is foreign-source and China does not tax it while he is inside the window, whether or not he moves the money to China. On the Indian side, he files his TRC and Form 10F, now Form 41, so the bank cuts 10 percent, ₹31,500, instead of the 30 percent default of ₹94,500, and he recovers the rest through his return. If Arjun stopped taking his long India trips and crossed six straight years, China would then tax that same ₹3.15 lakh at its flat 20 percent, ₹63,000, crediting only the ₹31,500 of Indian tax and charging the ₹31,500 difference. Selling his funds and drawing his Indian income inside the window, and keeping his travel pattern, is what keeps the Chinese tax at zero for now.