Q.991 Does paying TDS in India

make me a tax resident of India?

Question: Dear Mr.Chand, Thank you for your service to indian diaspora. I am a british citizen now and hold OCI card. I am asked by my building society in UK to confirm my tax status as required by HMRC. One of the questions is: are you tax resident in any other country? I have my NRO account and deposits for which my bank in India deducts TDS. Does this make me a tax resident in India? Many thanks for your advice. Raveesh Answer: The criteria to establish residency for tax purposes varies from jurisdiction to jurisdiction. Generally for individuals physical presence in a jurisdiction is the main test of residency, for instance spending more than 182 days in India may make an individual a tax resident in India. Simply paying TDS on bank interest income should not make you a tax resident of another country. However, you should seek clarification from the building society to alleviate your concerns I can only speculate that the reason for asking whether a person is a resident in another country would be to meet forthcoming information sharing guidelines that will soon go into effect in UK. Now when someone opens an account at any UK financial institution, the question of the person’s tax residency information will perhaps be a standard question that would be asked and recorded, read on . . .

Why Tax Residency information may

be required?

Financial account providers in UK such as banks, building Society, Investment firms etc. will probably start asking tax residency status from their account holders to update their records so as to comply with sharing of information with other countries. In an effort to combat tax evasion and perhaps check money laundering, several countries have signed on and pledged to automatic exchange of information of account holder’s information between countries. Hence the residential status of an account holder becomes important. For UK this exchange of information takes effect from September 2017. If you are a UK tax resident and you hold an account in another country then HMRC at some point of time will receive information about your foreign account. UK account information can now also be shared with other countries of which an account holder may hold residency status. NRIs may note that both India and UK are signatories to this agreement. Evading taxes by hiding money overseas is going to become more and more difficult as countries pledge to share information on account holders and bring transparency into the global banking system.