Q.903 Tax payable in UK on

Indian income such as rent & bank

accounts

I have acquired Permanent Residency in UK. My issues are following: - i) I have a flat in India which was acquired by me when I was in India and now I am earning rental income. The rental income of the flat is taxed in India. Whether the rental income can also be taxed in U.K. (after adjustment of the tax paid on the said rental income from India). I am informed that as per the DTA between India and UK, the rental income is not taxed again in UK. ii) I have some old fixed deposits with the Bank and income is derived from the Bank interest and the tax is being paid in India on the said interest. Whether any further tax is required to be paid after adjustment of the tax paid in India? iii) I have Public Provident Fund (PPF) Account with the Bank and every year, some amount is deposited. The payment in the PPF account is exempted from the Income Tax in India. The income, derived from the interest is also exempted in India. Whether tax has to be paid on the said interest income of PPF in UK? iv) I have transferred some amount from UK to the Bank in India and it is kept in fixed deposits. As per Indian Income Tax, the amount remitted from outside India and kept in FDR, there is no tax on the interest income and is totally exempted. Whether I am required to pay any tax on the said exempted income in UK? v) In India, the maximum rate of income tax is 30% and the rate in UK, it is about 40 – 45%. Whether I am required to pay additional income tax – the difference between Indian income tax and the UK income tax. Kind regards, Geeta Answer: Regarding your questions: 1. As per Article 6 of UK/India DTAA, Income from immovable property may be taxed in the Contracting State in which such property is situated. So rental income from property located in India would be taxed in India 2. UK residents are required to declare worldwide income for UK tax purposes. When filing tax in UK, a credit can be claimed for any tax already paid on the same income in India 3. My understanding is that PPF earnings and withdrawals would be taxable in UK. [currently NRIs cannot open new PPF accounts] 4. As #2 o Simply because one country does not tax a particular income does not mean that the other country would be obligated to also exempt such income. 5. Under DTAA tax credit is available for tax paid in a foreign country when filing tax in your country. Example: if income tax on a specific type of income is 30% in India and this income is not exempt under DTAA and taxable also in UK. Then when filing UK tax the tax UK tax liability will be reduced by the tax already paid in India and the difference has to be paid. For more information on PPF see question 391: Nri Investment in Public Provident Fund in India >>