508. UK Residents must pay taxes

on their worldwide income . . .

Question: Hi Virendar, I have an NRI question and just came across you site today. But first wanted to say what a great resource for us NRI's. I am an NRI living in the UK with UK citizenship. I have a flat, a few shares and a bank account in India (inherited from grandparents many years ago). I have an accountant who does my Indian tax returns annually. My question is; do I need to declare these assets to the UK tax office. The flat is my only property in India and is not rented out. I do not bring any money (interest or dividends) to the UK and pay taxes in India on the assets. Thanks again for such a useful site. Will be telling all my friends about it. Frank Gonsalves Answer: You state in your email, that you do not bring any money into UK and pay taxes in India. Since you are a resident in UK, you are required by UK tax regulations to show all global income on your UK tax return and claim a credit for taxes paid in India under the DTAA. According to UK tax regulations, those who live in UK permanently are normally required to pay tax on their worldwide income. Worldwide income can be income derived for example from: • Interest earned income • Rental income • overseas investment income • employment income when working abroad • pension income for overseas pension. or any other source of income There is however a Double Tax Avoidance Agreement (DTAA) between India and UK that would give you relief from paying taxes to two countries on the same income. As far as rental income is concerned, as per DTAA rental income in India would be taxed in India only. Although the Indian rental income as per UK tax laws must be disclosed when UK tax return is filed. UK allows you to claim the tax paid in India as a tax credit. This ensures that double tax is not paid. As far as paying tax on worldwide income for UK citizens its fairly simple. If you are a resident of UK, you pay taxes on worldwide income, other wise you pay tax only on the foreign income you bring into UK. UK citizens living in India paying taxes in UK UK citizens who do not permanently live in UK and are settled in India as OCI or PIO card holders, do not have to pay tax in UK on their Indian income. They are required to pay tax on their foreign income only if they take that income into UK. Temporary or Permanent Resident of UK Whether a person is a resident or non-resident for taxation purposes in UK generally depends on the time spent living in UK. • Staying in UK for 183 days or more in a tax year makes you a 'resident' for that year for tax purposes. • Those who spend more than an average of 91 days or more in a tax year based over a four consecutive year period can also be deemed to be resident. To clarify, a person could spend more than 91 days in a particular year but the four year average cannot be 91 days or more. So those who visit UK quite often and wish to keep their non-resident status, should keep track of the time they spend there. The day of arrival and day of departure are also counted in the 91 day calculation.