Hi,
In generic terms, UK resident and domiciled individuals are subject to tax on their worldwide income and gains on an arising basis, this is regardless of the tax exempt status in India. Foreign Tax Credit Relief is available in respect of tax deducted at source on Non-Resident Ordinary (NAO) accounts.
Although Non-Resident External (NRE) interest income is not taxable in India, NRE interest income has often been mistaken as being non taxable in the UK. This is incorrect, UK tax residents are subject to UK taxation on their worldwide income and gains subject to any remittance basis claims.
Under the UK-India Double Tax Convention, NRE account interest taxable in the UK, can receive credit for Indian tax, even if this has not been paid as the credit relief amount is calculated through the tax spared mechanism, which deems Indian tax to have been paid at the marginal rates applicable there. You can see guidance here:
DT9553 - India: Notes
Under the UK-India Double Tax Convention, NRE account interest taxable in the UK can receive credit not exceeding 15% for Indian tax even if this has not been paid.
UK tax relief not exceeding 15% is available for ten years from the opening date of the NRE account per Article 24(5) UK-India Double Tax Convention.
UK/INDIA DOUBLE TAXATION CONVENTION
NRE interest income should be declared within an in individuals UK Self Assessment return.
Thank you.
