521. UK Taxes for consultant living

in UK and working for company in

India . . .

Question: Hallo. My son is a resident of UK and has a contract from an IT firm in India. He will work from the UK, i.e offshore, not in India. His earnings will be called consultancy fees, for developing software for them exclusively,(i.e. he will not hold any right to it), If these earnings are deposited in his NRO account in ICICI in India, can he repatriate them to himself in the UK after paying the due witholding tax as appears in the taxation rules under DTAA. I ask because ICICI has reservations that income earned by an NRI in India cannot be repatriated even after paying the tax, even if he is fully resident in the UK. They say, only income through interest can be repatriated. I feel that their interpretation may not be correct. Please advise Thank you, mm Answer: Since your son lives and works in UK, he should be paid in UK. The Indian company he is working for should be sending him the money in UK. There are provisions in the Indian system by which employers can and should send payments in foreign exchange for work they get done overseas. The question that arises here is that why is your son working in UK and willing to accept payment in India in Indian currency! Some may even consider such an act as an effort to avoid paying UK taxes on foreign income. ICICI bank may be right in denying repatriation from NRO account for what your son may say is Indian income. Since your son is domiciled in UK and is actually preforming the work in UK, the question of him paying taxes in India does not arise. DTAA would come into play if he was working in India and being taxed in India. In such a scenario, your son would then get the benefit of claiming credit for taxes paid in India under the DTAA when he filed his UK taxes.