India-UK DTAA: NRI Tax Implications in UK
Neha Navaneeth
Marketing and Content Associate
Aug 25, 2025
For NRIs in the UK, managing finances across borders often brings the challenge of double taxation—where the same income is taxed in both countries. The India–UK Double Taxation Avoidance Agreement (DTAA) helps prevent this by allowing credits for taxes paid in India against UK tax liabilities. First signed in 1993 and updated through the 2012 Protocol and the Multilateral Instrument (MLI), the treaty lays out how different types of income are taxed, making it essential for UK-based NRIs to plan their Indian income and investments effectively.
Determining UK Tax Residency
To leverage the India UK DTAA, an individual must first be a "resident" of one or both contracting states. UK tax residency is determined by the Statutory Residence Test (SRT), which considers days spent in the UK and connections ("ties") to the country. Establishing UK tax residency is crucial for an NRI to access India UK DTAA benefits and understand their Tax for NRIs in UK
Taxation of Key Indian Income for UK Residents under the India UK DTAA
The India UK DTAA allocates taxing rights for various income types. For a UK resident NRI, its impact on key Indian income streams is as follows:
Capital Gains (Equity, Mutual Funds):
Under Article 14 of the India–UK DTAA, capital gains are first taxed in India via TDS, finalized through your ITR. In the UK, you report the same gains but claim a Foreign Tax Credit (FTC) for Indian tax paid, avoiding double taxation.
For 2024–25 tax year, UK taxes capital gains above £3,000 at 10% (basic rate) or 20% (higher rate). In India, it’s 12.5% LTCG (over ₹1.25 lakh) and 20% STCG.
Here’s how it works in practice:
Example 1: Long-Term Capital Gain (LTCG) of ₹2 Lakh
Tax in India: India taxes you 12.5% on the gain over ₹1.25 lakh, which is ₹9,375.
Tax in the UK:
Calculate Gain in GBP: ₹2,00,000 ÷ 105 = £1,905
Calculate UK Tax (before FTC): Assuming you're a higher-rate taxpayer (20% rate) and have used your annual exemption, the UK tax is £1,905 * 20% = £381.
Calculate FTC in GBP: ₹9,375 (Indian tax) ÷ 105 = £89.
Final UK Tax: £381 (UK Tax) - £89 (FTC) = £292.
Example 2: Short-Term Capital Gain (STCG) of ₹2 Lakh
Tax in India: India taxes short-term gains on listed shares at a flat rate of 20%.
Indian Tax Payable: ₹2,00,000 * 20% = ₹40,000.
Tax in UK:
Calculate Gain in GBP: ₹2,00,000 ÷ 105 = £1,905.
Calculate UK Tax (before FTC): Assuming you are a higher-rate taxpayer (20% rate) and have already used your £3,000 annual exemption, the UK tax is £1,905 * 20% = £381.
Calculate FTC in GBP: ₹40,000 (Indian tax) ÷ 105 = £381.
Final UK Tax: £381 (UK Tax) - £381 (FTC) = £0.
Dividend Income:
Article 11 of the India UK DTAA allows India to tax dividends paid by Indian companies to UK residents, with the tax rate generally capped at 10%. However, a higher 15% tax rate applies to dividends paid by certain 'property investment vehicles.' These are typically entities like a Real Estate Investment Trust (REIT), which primarily earns its income from a portfolio of real estate investments. The UK also taxes this, providing an FTC for Indian tax paid under the DTAA UK India personal tax rules.
Interest Income:
NRO Accounts: NRO account interest is taxable in India. For UK resident NRIs, Article 12 of the India UK DTAA caps Indian tax at 15%. The UK gives an FTC.
NRE Accounts: Interest from your NRE account is tax-free in India but is taxable in the UK. The India-UK DTAA provides a unique "tax sparing" benefit to reduce this UK tax. It allows you to claim a UK tax credit for the tax that India chose to spare (waive).
Other Income Streams under the India-UK DTAA
Rental Income (Article 6):
Taxed in India first; also taxable in the UK, but you get FTC for Indian tax paid.
Pensions:
Government pensions (Article 19):
If you’re an Indian citizen, pension is taxed only in India.
If you’re also a UK citizen, pension is taxed only in the UK.
Private pensions/annuities (Article 20):
Taxed only in the UK.
Business & Professional Income (Articles 7 & 15):
Business profits taxable in India only if you have a Permanent Establishment (PE) there.
Professional services taxable in India if you stay 90+ days or maintain a fixed base (e.g., office) in India.
FTC available in the UK for any Indian tax paid.
Quick Reference: India–UK DTAA Treatment by Income Type
Income Type | Taxed in India? | Taxed in UK? | Relief Method | Summary |
|---|---|---|---|---|
Capital Gains (Equity / Mutual Funds) | Yes, as per Indian rules (12.5% LTCG, 20% STCG) | Yes | FTC (credit in UK) | You pay in India first, then claim credit in the UK to avoid double tax. |
Dividend Income (from Indian company) | Yes, usually 10% (15% in some cases) | Yes | FTC | Both countries tax, but UK gives credit for Indian tax paid. |
Interest – NRO Account | Yes, 15% TDS | Yes | FTC | Tax deducted in India, credit available in UK. |
Interest – NRE Account | No (exempt in India) | Yes | “Tax Sparing” credit in UK | Even though India doesn’t tax it, UK still can. You may get UK relief as if India taxed it. |
Rental Income (Indian property) | Yes, normal Indian tax rates | Yes | FTC | Taxed in India first, then adjusted in UK. |
Salary (for work done in India) | Yes, unless exempt under 183-day rule | Yes | FTC | Taxable in both, UK gives credit. |
Government Pension (Govt of India service) | Yes, taxable only in India (unless you’re also UK national) | No (except UK nationals) | Exemption method | If you’re Indian citizen → taxed only in India. If also a UK citizen → taxed only in UK. |
Private Pension / Annuity | No | Yes (only UK) | Not applicable | UK has exclusive right to tax. |
Business Income (Indian PE) | Yes, if you have a “Permanent Establishment” in India | Yes | FTC | Only taxed in India if you run a branch/office (PE). UK gives credit. |
Professional Income (services in India) | Yes, if stay ≥90 days or fixed office in India | Yes | FTC | If you spend time or have an office in India, India can tax; UK gives credit. |
Benefits of UK Tax Residency (for DTAA with India)
Treaty access: If you’re UK-resident under the SRT, you can apply the India-UK DTAA to Indian income.
Lower Indian withholding:
Dividends: generally 10% (or 15% for certain investment vehicles).
Interest: generally 15% (10% only when the recipient is a bank).
Foreign Tax Credit (FTC): Claim UK credit for Indian tax paid on the same income.
Tax-sparing (NRE/FCNR interest): UK may give a notional credit (capped ~15%) for Indian tax forgone; typically limited to 10 years per source.
Certainty & compliance: Clearer taxing rights and alignment with the UK’s rule to tax worldwide income if resident.
Claiming Benefits: TRC and Form 10F
To claim India UK DTAA benefits, such as lower withholding tax rates on Indian income, a UK resident NRI must furnish specific documents:
Tax Residency Certificate (TRC): This is obtained from His Majesty Revenue & Customs (HMRC) in the UK, certifying UK tax residency.
Form 10F: This self-declaration is filed electronically on the Indian Income Tax portal, often supplementing the TRC.
Frequently Asked Questions (FAQs)
What documents are essential to claim India UK DTAA benefits?
Key documents are a UK Tax Residency Certificate (TRC) from HMRC and an electronically filed Form 10F submitted to Indian tax authorities.
Is interest from an NRE account taxable for a UK NRI under the India UK DTAA?
NRE interest, tax-free in India, is taxable for a UK resident NRI. The India UK DTAA offers a "tax sparing" credit (up to 15%) in the UK for up to 10 years, treating Indian tax as paid.
What happens if I am considered a tax resident in both India and the UK at the same time?
If an individual qualifies as a resident in both India and the UK under their respective domestic laws, Article 4 of the India UK DTAA provides "tie-breaker" rules to determine a single state of residence for treaty purposes.
As a UK resident, do I have to pay Indian tax on my salary if I work in India for a short period?
No, your salary is exempt from Indian tax provided you meet all three conditions:
You are in India for less than 183 days.
Your employer is not a resident of India.
Your salary cost is not paid by your employer's Indian office (Permanent Establishment).
