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Posted Tue, 31 Dec 2024 17:20:18 GMT by Saurabh Jain
Dear HMRC, I seek guidance on the application of Article 24(5) of the UK-India Double Taxation Agreement (DTAA) regarding interest earned on a Non-Resident External (NRE) fixed deposit in India. Below are the details of the scenario and my questions: Scenario: I hold a 10-year NRE fixed deposit that commenced on 10th April 2014 and will mature on 9th April 2024. The interest is paid at maturity but is accrued annually, as reflected in my NRE statement. The statement includes two columns: "Interest Paid" (showing £0 for each year) and "Interest Accrued" (reflecting the interest accrued annually). The fixed deposit can be prematurely broken at any time with a penalty. Questions: Tax Declaration Timing: Should I declare the accrued interest in my UK tax return each tax year, based on the "Interest Accrued" figures, or should I declare the total interest only in the 2024-25 tax year when it is paid at maturity? Impact of Premature Withdrawal Option: Would your answer to Question 1 change if I have the option to break the fixed deposit prematurely at any time by paying a penalty? Spare Tax Credit Eligibility: Assuming the interest is taxed entirely in the UK in the 2024-25 tax year, will I be eligible to claim the 10-year tax sparing credit under Article 24(5) for the full interest amount, given the NRE deposit’s tax-free status in India? Renewal or New FD Impact: If I renew this fixed deposit for another 10 years (starting after April 2024) at a different interest rate: Will I qualify for another 10 years of tax sparing credit under Article 24(5) for the renewed deposit? Would your answer change if I open a new account with a different bank for the renewal? I appreciate your guidance on these points to ensure accurate reporting and compliance. Kind regards, Saurabh
Posted Thu, 16 Jan 2025 15:36:37 GMT by HMRC Admin 25 Response
Hi Saurabh Jain,
This forum is for general queries only and is intended to help you self-serve.
We are unable to provide specific advice tailored to individual circumstances.
You can contact our Self Assessment helpline to discuss further here:
Self Assessment: general enquiries
Thank you. 

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