India-UK DTAA: NRI Tax Guide 2026
For Indians living in the UK and British-Indian families returning to India, cross-border income is governed by the India-UK Double Taxation Convention. Its rules differ from the India-US treaty in several places, particularly on pensions and capital gains.
This guide covers who taxes what under the treaty, how UK pensions are treated, how to claim foreign tax credit through Form 67, and the mistakes that most often cost UK-India taxpayers money.
The India-UK DTAA: Overview
- Signed: 25 January 1993 in New Delhi
- In force: 25 October 1993; effective in India from 1 January 1994 (from assessment year 1994-95 onwards)
- Later amendment: a subsequent protocol revised, among other things, the dividend article
- Coverage: income tax in India; income tax, corporation tax and capital gains tax in the UK
Residential Status Comes First
Treaty relief starts from your residential status under Section 6 of the Income Tax Act, 1961 (for FY 2025-26).
| Status | Test (simplified) | Taxable in India |
|---|---|---|
| Resident | In India 182 days or more in the year, or 60 days in the year plus 365 days in the 4 preceding years (the 60 days becomes 182 for Indian citizens leaving for employment abroad, and 120 for Indian citizens or PIOs visiting India whose Indian income exceeds Rs 15 lakh) | Global income if Resident and Ordinarily Resident |
| Resident but Not Ordinarily Resident (RNOR) | Resident, but non-resident in 9 of the 10 preceding years, or in India for 729 days or less in the 7 preceding years; also certain deemed residents | Indian income, plus foreign income from a business controlled or profession set up in India |
| Non-resident (NRI) | Does not meet the resident tests | Only income received or arising in India |
Where you are resident in both countries under their domestic laws, Article 4 of the treaty decides treaty residence through tie-breakers: permanent home, centre of vital interests, habitual abode, then nationality.
Who Taxes What
Salary (Article 16, Dependent Personal Services)
Salary is taxable in your country of residence unless the employment is exercised in the other country, in which case that country may also tax it. The other country cannot tax it if all three conditions are met: you are present there for no more than 183 days in its fiscal year, the employer is not a resident of that country, and the salary is not deducted by a permanent establishment there.
| Situation | Treatment |
|---|---|
| UK resident, working in the UK for a UK employer | UK taxes; not taxable in India (Indian law also exempts it if you are an NRI) |
| India resident working in India for a UK employer | India taxes; UK does not |
| India resident sent to work in the UK for more than 183 days | UK may tax the UK-work salary. If you remain resident in India for that year, India also taxes it and gives credit for UK tax. If you become a non-resident, India does not tax it. |
| Short UK business trip of up to 183 days, paid by an Indian employer | Taxable only in India |
UK Pensions (Articles 19 and 20)
| Pension | Taxed in |
|---|---|
| UK government pension for services to the UK government (civil service, armed forces and similar) | Only the UK (Article 19(2)) |
| Private, occupational or personal pension, annuities, and UK state pension paid under social security legislation | Only the country of residence (Article 20) |
So a resident of India must include UK private pensions and the UK state pension in the Indian return, and can ask HMRC for an NT tax code so the UK pays them gross. A UK government pension stays taxable only in the UK.
Dividends and Interest (Articles 11 and 12)
| Income | Rate cap in the source country |
|---|---|
| Dividends from an Indian company to a UK resident | 10%, or 15% where paid by an investment vehicle out of income from immovable property (as amended by the protocol) |
| Dividends from a UK company to an Indian resident | The UK does not withhold tax on dividends; the dividend is taxable in India at slab rates |
| Interest | 15%; 10% where paid to a bank carrying on bona fide banking business |
Capital Gains (Article 14)
Article 14 lets each country tax capital gains under its own domestic law. There is no treaty rule giving exclusive rights to the country where the property is or where the seller lives.
- An Indian resident who sells UK property or UK shares must report the gain in India, and can claim credit for UK capital gains tax through Form 67, limited to the Indian tax on that gain.
- A UK resident who sells Indian property or shares is taxed in India under Indian law (with TDS under Section 195), and claims relief in the UK.
Claiming Relief
Indian residents: foreign tax credit through Form 67
Rule 128 allows credit for UK tax on income that is also taxed in India, limited to the lower of the UK tax and the Indian tax on that income.
- Convert the UK tax at the SBI telegraphic transfer buying rate on the last day of the month before the month in which the tax was paid or deducted.
- Apportion UK tax-year figures (6 April to 5 April) to the Indian financial year.
- File Form 67 with proof of UK tax paid (P60, HMRC calculation) on or before the end of the assessment year, ideally with the ITR.
- Report the income in Schedule FSI and the credit in Schedule TR.
Example (FY 2025-26, new regime): A resident of India earns UK salary of Rs 50,00,000 (£50,000 at Rs 100) and pays UK tax of £10,000 (Rs 10,00,000). After the Rs 75,000 standard deduction, Indian tax on Rs 49,25,000 is Rs 10,57,500 plus 4% cess = Rs 10,99,800. Credit is the lower of Rs 10,00,000 and Rs 10,99,800, so Rs 10,00,000. Net Indian tax: Rs 99,800.
UK residents claiming treaty rates in India: TRC and Form 10F
A UK resident (for example an NRI earning Indian interest or dividends) who wants the treaty rate in India needs a certificate of residence from HMRC (the Tax Residency Certificate) and must furnish Form 10F electronically on the income tax portal (Section 90(4) and (5)). These are not needed by an Indian resident claiming credit for UK tax.
Multilateral Instrument (MLI)
India and the UK both signed the Multilateral Instrument in June 2017 and later ratified it. Where it modifies the India-UK treaty, its Principal Purpose Test lets either country deny treaty benefits if obtaining them was one of the principal purposes of an arrangement. Check the synthesised text of the India-UK treaty before relying on any treaty benefit for a structured arrangement.
Common Mistakes
- Not filing Form 67 and losing credit for UK tax.
- Treating a UK private pension as tax-free in India after becoming resident here.
- Treating a UK government pension as taxable in India, when Article 19(2) reserves it to the UK.
- Assuming UK property gains are taxable only in the UK. Under Article 14, an Indian resident reports them in India and claims credit.
- Ignoring the 183-day test for short UK assignments.
- Using the wrong status. Returning NRIs are often RNOR for a year or two, which keeps most UK income outside India.
Step-by-Step Checklist
- Work out your residential status for the year (resident, RNOR or non-resident).
- List every income source by country: UK salary, UK pensions, UK dividends and interest, Indian income, capital gains.
- Apply the treaty article for each income type (tables above).
- Collect proof of UK tax (P60, HMRC calculation) and convert it at the Rule 128 rate.
- File Form 67 and the ITR with Schedules FSI, TR and FA as applicable.
UK/India Double Taxation Convention signed 25 January 1993 (text published by HM Revenue and Customs), Articles 4, 11, 12, 14, 16, 19 and 20; Income-tax Act, 1961, Sections 6, 90 and 195; Income-tax Rules, 1962, Rule 128 as amended by CBDT Notification 100/2022; OECD Multilateral Instrument (2017).
