India-UK DTAA: Taxation of Salary, Pension, Dividends and Capital Gains for UK-India Cross-Border Income

India-UK DTAA: NRI Tax Guide 2026

For the 1.8 million UK-based Indians and returning British-era residents, navigating taxes between India and UK requires understanding a specific treaty: the India-UK DTAA (Double Taxation Avoidance Agreement). Unlike India-USA DTAA, the India-UK treaty has unique rules, particularly around UK pensions and UK tax residency.

This guide covers who pays tax where, how UK pensions are taxed differently based on residency, how to claim Form 67 FTC relief, and the most common mistakes that British-Indian taxpayers make.

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The India-UK DTAA: Overview

Treaty details:

• Signed: November 25, 1993
• Protocol: January 26, 1995
• Model: OECD model (comprehensive)
• Coverage: All types of income (salary, business, investment, pensions)

The treaty aims to prevent double taxation by assigning taxing rights to one country for each income type. Before the treaty, a UK resident earning Indian rental income could be taxed by both India and UK on the same income.

Residential Status Under the Treaty

Before applying the DTAA, determine residential status under Indian law (Section 6, Income Tax Act).

Three categories:

1. NRI: Outside India 182+ days in current year. Only Indian-source income taxable in India.
2. RNOR: In India less than 120 days current year AND less than 90 days average for past 4 years. Only Indian-source income taxable (dividends/interest remitted also taxable).
3. Resident (OR): 182+ days in India OR meets 60-day test. Global income taxable in India.

For UK-India context, many professionals are RNOR (in India part-year for work, rest in UK). RNOR gets significant DTAA protection.

Who Pays Tax Where: Income Type

Salary and Employment Income (Article 15)

Rule: Income from employment is taxed in the country where employment is physically performed.

Key applications:

• UK resident working for UK employer in UK: Taxed only in UK. India has no taxing right (work is in UK). As NRI, no Indian tax.

• Indian resident working for UK employer in India: Taxed only in India (work is in India). UK has no taxing right. Pay full Indian income tax.

• Indian resident seconded to UK office for 2 years: Taxed only in UK for those 2 years (work performed in UK). India cannot tax it even though you are India-origin.

• RNOR working in both India and UK in same year: Apply apportionment. Salary for days worked in India is Indian-source; salary for days in UK is UK-source.

No 183-day threshold applies for salary under India-UK DTAA (unlike USA). It is purely country of physical performance.

UK Pension (Article 17)

This is the critical difference in India-UK DTAA.

UK private pension (from UK company pension scheme, personal pension, annuity): Taxable only in country of RESIDENCE when pension is received.

In practice:

• UK private pension, UK resident: Taxable only in UK (standard UK income tax on pension).
• UK private pension, Indian resident: Taxable only in India (under Indian income tax law). UK has NO taxing right.
• UK pension, Indian resident returns to UK (becomes resident): That year and future years, pension taxed only in UK.

UK government pension (civil service, NHS, military, armed forces): Taxable only in country paying the pension (UK), regardless of residency.

Impact: Many returning NRIs receive UK pensions. If resident in India, full pension is taxable in India; if RNOR/NRI, often not taxable.

Dividends and Interest (Articles 10 & 11)

Dividends (Article 10): Withholding tax capped at 15% (reduced from UK domestic 20%).

Interest (Article 11): Withholding tax capped at 15% (reduced from UK domestic 20%).

Application:

• UK company paying dividend to Indian resident: Can withhold 15% TDS (not 20%). Resident can claim Form 67 credit in India ITR.
• Indian company paying dividend to UK resident: Can withhold 15% TDS. UK resident reports in UK tax return; India credit available if treaty benefits claimed.

Capital Gains (Article 13)

Immovable property (land, building): Gains taxed in country where property is located.

• Selling UK property: Capital gains taxed only in UK (not in India, even if Indian resident).
• Selling Indian property: Capital gains taxed only in India (not in UK, even if UK resident).

Movable property (shares, securities): Gains taxed in country of residence.

• Indian resident selling UK shares: Taxed in India (capital gains tax applies).
• UK resident selling Indian shares: Taxed only in UK (not India, as UK-resident-owned).

Residential Status Proof: TRC and Form 10F

To claim DTAA benefits, UK tax authority requires proof of UK residency.

Tax Residency Certificate (TRC) from UK (HMRC):

• Application: Form TRC via HMRC online or by post
• Processing: 2-4 weeks
• Cost: Free
• Must be obtained BEFORE filing Indian ITR if claiming DTAA relief
• Contains: Your name, PAN, UK residency status, dates of residence

Form 10F in Indian ITR:

• Schedule attached to ITR declaring foreign source income
• Requires TRC attached
• Required ONLY if you have foreign-source income AND claiming DTAA relief

Form 67: Foreign Tax Credit (FTC) Claim

Form 67 is filed before ITR to claim FTC on foreign taxes paid.

Who needs it:

• Salaried employees paying UK tax on UK employment
• ESOP holders with US withholding (W-2 tax)
• Any income that was taxed in UK and is also taxable in India

Step-by-step:

1. Download Form 67 from e-filing portal
2. Fill country (UK), head of income, amount, foreign tax paid, exchange rate
3. Attach UK tax certificate/P60
4. Upload on portal BEFORE ITR deadline
5. Claim FTC in Schedule TR of ITR (lower of Indian tax on that income OR UK tax paid)

FTC mechanics: Prevents double taxation. If you paid UK tax on UK salary and also owe Indian tax on same salary, you get credit for UK tax in India.

Example:

• Salary earned in UK: £ 50,000 (Rs 50 lakh equivalent)
• UK tax paid: £ 10,000 (20%)
• Indian tax on this income: Rs 15 lakh (30%)
• FTC in India ITR: Rs 8 lakh (lower of Rs 15 lakh Indian tax OR Rs 8 lakh UK tax equivalent)
• Net Indian tax owed: Rs 7 lakh

Common Mistakes and How to Avoid Them

Mistake 1: Not claiming Form 67 FTC

Many NRIs earning UK salary omit to file Form 67 and end up paying double tax. If you earned UK income and paid UK tax, file Form 67 BEFORE ITR.

Mistake 2: Assuming UK pension is tax-free in India

If you receive UK private pension and are India resident, full pension is taxable in India. Many forget to report it.

Mistake 3: Not obtaining TRC before filing ITR

DTAA benefits are denied if TRC is not attached. Obtain UK TRC early, especially if claiming RNOR status.

Mistake 4: Forgetting to update residency status

If you moved back to India and became resident, all UK pensions become India-taxable from that year. Update status in ITR.

Mistake 5: Capital gains on UK property

If you sold UK property and made a gain, that is taxable only in UK, not India (even if Indian resident). Do not double-declare.

Step-by-Step: Claiming DTAA Benefits as UK-India Cross-Border Taxpayer

Step 1: Determine residential status

Are you NRI, RNOR, or Resident? This decides what income is taxable in India.

Step 2: List all income sources

• UK salary (if any)
• UK pension
• UK dividends/interest
• Indian rental/dividend income
• Capital gains (specify country)

Step 3: Obtain TRC from UK (HMRC)

Apply online or by post. Provide PAN, UK reference number, dates of residence.

Step 4: File Form 67 (if UK tax was paid)

File on e-filing portal BEFORE ITR filing deadline. Include TRC and UK tax payment certificate (P60/payslip).

Step 5: Compute tax under DTAA

For each income type, determine which country taxes it per treaty articles. Example:

• UK salary: Taxed in UK only (no Indian tax)
• UK pension: Taxed in India (if resident), UK (if UK resident)
• Indian rental: Taxed in India only
• UK property sale: Taxed in UK only

Step 6: File ITR with Schedule FSI and TR

• Schedule FSI: List foreign source income details
• Schedule TR: Claim FTC (lower of Indian tax OR foreign tax paid)
• Attach TRC

Multilateral Instrument (MLI) Changes to India-UK DTAA

India and UK both signed the Multilateral Instrument (MLI) in 2017, which modifies bilateral DTAA treaties.

Key changes:

1. Principal Purpose Test (PPT): Treaty benefits denied if arrangement's principal purpose is to avoid tax.
2. Tie-breaker rule: If person is resident of both countries, tie-breaker is applied (permanent home, centre of vital interests, habitual abode, citizenship).

Impact: Anti-avoidance measures prevent treaty shopping. If you structure arrangements purely to avoid tax, benefits can be denied.

Key Takeaways for Action

1. Determine status first. NRI, RNOR, or Resident? This defines your tax scope.
2. Obtain TRC from UK. Essential for claiming DTAA relief.
3. File Form 67 before ITR. Claim FTC on UK taxes paid.
4. Report UK pension correctly. If resident, full pension is taxable in India.
5. Avoid double declarations. Capital gains on UK property—taxed only in UK, not India.
6. Update residency annually. If you move between countries, update residential status each year.

Frequently Asked Questions

I am a UK resident receiving a UK pension of £ 30,000/year. Am I taxed in India?

No. Under Article 17 of the India-UK DTAA, UK private pensions are taxed only in the country of RESIDENCE. If you are UK resident, only UK taxes your pension (standard UK income tax). India has no claim. As NRI, no Indian tax.

I worked in UK for 3 years, paid UK income tax, and returned to India. I am now resident. Can I claim back taxes?

No. DTAA applies prospectively, not retroactively. For past years of UK work, India may claim tax on UK salary (if you were resident at the time). File amended ITRs if needed and claim Form 67 FTC for UK taxes paid.

I sold my UK house and made a £ 200,000 gain. Am I taxed in India?

No. Capital gains on immovable property (Article 13 DTAA) are taxed only in the country where property is located. Your UK property gain is taxed only in UK via UK capital gains tax. India cannot tax it.

What if I am a UK resident but earned income in India? Where is that taxed?

Under Article 15 (salary) or Article 7 (business), income from employment/business in India is taxed only in India. Even though you are UK resident, Indian-source income is taxed in India. You can claim Form 67 FTC credit in UK tax return if India taxes it.

I am RNOR. Do I file Form 10F and TRC?

Only if you have foreign-source income AND claiming DTAA relief. If your entire income is Indian-source, Form 10F and TRC are not needed. If you have UK pension or UK salary, file Form 10F with TRC to claim DTAA treaty protection.

India-UK DTAA signed November 25, 1993 (Ministry of External Affairs); Protocol January 26, 1995; CBDT Circular No. 789 (DTAA application); Articles 4, 10, 13, 15, 17, 18 of the treaty; HMRC TRC procedure; Multilateral Instrument (MLI) 2019 (as modified to India-UK DTAA).