Q645. Bank account interest in India is taxable in UK for UK resident . . .
Question: Dear Sir,
I am an NRI living in the UK with UK citizenship. I have opened a one year NRE fixed deposit account with an indian bank in india.
The original capital sum was transfered to this account from my bank in the UK. When the fixed term mutures will I have to pay
tax in the UK on bringing back just the capital sum but leaving the interest earned in my indian bank account?
Eagerly awaiting your advice,
Mr M Chauhan
Answer: When your fixed deposit one year term ends, you will have a choice of either bringing the money (original amount + interest) back to UK or continue banking in India. • If you leave the interest income in your Indian bank account and just transfer the original amount back to UK, you would still have to declare the interest amount earned in India, as income in UK when you complete your UK tax return. Since you are a UK resident, any foreign investment income you get, is taxable in UK. o The original investment amount that you sent from UK would not be taxable, only the interest income you make on the investment is taxed. • Whether you transfer the interest + original to UK or just the principle amount, the interest income would be taxable in UK. No taxes would apply in India, as interest on NRE accounts is exempt in India. Note: You may also wish to see question/answer number 643 titled ‘Explanation of Double Tax Avoidance Agreements’
Disclaimer: Information provided is for general knowledge only and should not be deemed to be professional advice. For professional advice kindly consult a professional
accountant, immigration advisor or the Indian consulate. Rules and regulations do change from time to time. Please note that in case of any variation between what has been
stated on this website and the relevant Act, Rules, Regulations, Policy Statements etc. the latter shall prevail.
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Q645. Bank account interest in
India is taxable in UK for UK
resident . . .
Question: Dear Sir, I am an NRI living in the UK with UK citizenship. I have opened a one year NRE fixed deposit account with an indian bank in india. The original capital sum was transfered to this account from my bank in the UK. When the fixed term mutures will I have to pay tax in the UK on bringing back just the capital sum but leaving the interest earned in my indian bank account? Eagerly awaiting your advice, Mr M Chauhan Answer: When your fixed deposit one year term ends, you will have a choice of either bringing the money (original amount + interest) back to UK or continue banking in India. • If you leave the interest income in your Indian bank account and just transfer the original amount back to UK, you would still have to declare the interest amount earned in India, as income in UK when you complete your UK tax return. Since you are a UK resident, any foreign investment income you get, is taxable in UK. o The original investment amount that you sent from UK would not be taxable, only the interest income you make on the investment is taxed. • Whether you transfer the interest + original to UK or just the principle amount, the interest income would be taxable in UK. No taxes would apply in India, as interest on NRE accounts is exempt in India. Note: You may also wish to see question/answer number 643 titled ‘Explanation of Double Tax Avoidance Agreements’
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RI Information
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educating and connecting Indians across the globe
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