DTAA India UK NRI: How to Avoid Double Taxation as an Indian NRI in the UK

For Indian NRIs in the UK, navigating cross-border taxation can be complex. This comprehensive guide uncovers everything about DTAA India UK NRI, from claiming foreign tax credits to residency tests, exemptions, and steps to maximise tax efficiency.

What Is DTAA India UK NRI and Why It Matters

The DTAA India UK NRI treaty, signed in 1993, is a legal framework designed to prevent income from being taxed twice, once in India and again in the UK.

Under this agreement, NRIs can claim credit for taxes already paid abroad, significantly easing their tax burden. Understanding the India UK tax treaty benefits is your first step toward smarter NRI tax planning in the UK.

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1. Key Benefits of DTAA India UK NRI

Foreign Tax Credit (FTC)

A major benefit of DTAA India UK NRI is the ability to claim FTC. For instance, taxes paid in the UK on salary can be offset against Indian tax liability, thanks to Section 90 of India’s Income Tax Act . The treaty applies the “lower-of-the-two” rule to ensure fair credits

Lower Withholding Rates on Passive Income

With DTAA India UK NRI, dividends and interest from Indian investments are subject to reduced TDS, often slashed to 10-15%, instead of the standard Indian rates of 30%

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Residency & Remittance: Remittance vs Worldwide Basis

Under UK tax law, NRIs are taxed on remitted income (income brought into the UK), not their global earnings. Combining this with DTAA India UK NRI allows you to defer tax on income retained in India.

2. DTAA India UK NRI: Check Your UK Tax Residency

The Statutory Residence Test (SRT) defines whether you’re a UK tax resident. If you stay in the UK for 183+ days or meet specific ties, you’re a resident

NRIs should understand this before applying DTAA India UK NRI because the treaty applies differently based on residency.

Also Read: Investing in the UK Mutual Funds for NRIs: Everything You Need to Know

3. Which Incomes Qualify Under DTAA India UK NRI?

The treaty covers various incomes:

Income Type	India Tax	UK Tax	DTAA Treatment
Salary Source	country tax + credit	Residence country tax with FTC	FTC applies
Passive Income	Withholding tax applies	Taxed	Reduced TDS via DTAA
Capital Gains	Taxable if assets in India	Taxed	Some capital gains may be taxed in both, check specific clauses
Pensions	Taxable as per treaty	Taxed	Relief on pension income included

4. Step-by-Step: How to Use DTAA India UK NRI

• Establish Residency: Use UK’s SRT to confirm your tax status.
• Calculate Income by Source: Identify earnings from India vs UK.
• File in Both Countries: Declare global income in the UK (remitted basis) and India.
• Claim FTC in India: Use Form 67 to offset UK taxes.
• Use Reduced TDS Rates: Submit DTAA declaration to banks in India.
• Maintain Documentation: Keep salary slips, tax certificates, and Form 67 for audits.

Also Read: How to Invest in India as an NRI Living in the UK In 7 Simple Steps

5. Smart NRI Tax Planning Under DTAA India UK NRI

• Invest tax-efficiently: Use dividend-paying equities or bonds with lower TDS.
• Use remittance planning: Bring income during lower UK tax years.
• Pension mapping: Claim treaty-based relief for Indian pensions received in the UK.
• Watch capital gains: Confirm if your gains fall under treaty clauses, seek professional advice.

6. Common Pit falls to Avoid

• Missing documents: No Form 67 = no FTC in India.
• Misunderstanding tax residence: Incorrect UK residency claims can disqualify DTAA benefits.
• Wrong TDS submissions: Not submitting treaty form leads to high withholding.
• Ignoring exclusions: Employment income from India may not be protected, check specifics.

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FCA Disclaimer:

This article is for educational purposes only. It does not provide regulated financial advice. WealthilyYours and its contributors are not FCA-regulated. Tax rules can change, consult a certified tax advisor or Chartered Accountant before making decisions.

General Disclaimer:

We are not certified tax practitioners. Please consider this a guide, not a substitute for professional advice. Always verify current laws in both the UK and India.

Final Thoughts

By understanding DTAA India UK NRI, Indian NRIs in the UK can confidently plan their finances, maximising foreign tax credits, leveraging lower TDS, and making informed decisions around remittance and residence.

Also Read: 7 Smart Ways to Use QROPS to Transfer Your UK Pension to India as an NRI

Tax efficiency is achievable, equip yourself with DTAA knowledge, keep thorough records, and consult professionals when needed. Doing so ensures your hard-earned money stays productive, compliant, and optimised.

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