Saving account interest from Indian bank account(NRE)

Hi HMRC, I have received the following advice from other HMRC Admin regarding tax credit relief(15%) available even if the tax is not paid to the Indian Tax authorities at all. Could you please confirm the advice is still correct? " Although NRE interest income is not taxable in India NRE interest income has often been mistaken as 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. (UK-India DTC notes page HMRC’s Double Taxation Relief Manual DT9553). 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. NRE interest income should be declared within an in individuals UK self-assessment return. Thank you " Is the tax credit relief of 15% available if the Tax is not paid to the Indian Gov for the NRE account and the account is less than 10 years old? Please reply as soon as possible I only have one day to submit the return. Thank you, Viha

Hi,

The NRE tax relief is only available for 10 years from the opening of the account. If the account has been opened within the last 10 years then 15% tax credit relief is available. 

Thank you.

 

Thank you so much for replying. Please confirm this 15% relief is still available even if the tax is not paid in India. And what needs to be added on "Foreign tax taken off or paid" box on the return ? if we enter 0.00, it does not calculate tax relief even if selecting 15% on the drop down box. Thanks, 

Hi,
 

If the conidtions outlined prior are met then yes you can claim the 15% even if no tax was paid in India. This will need to be entered manually on the return. Thank you.

Thank you again for your reply. If we open another NRE account and transfer the money from the old to the new account, would the 10 years period rule start from the creation of the old account or it would start the fresh 10 year period from the opening of the new account? Kind regards, Viha

Hi viha,

You would need to discuss this with your account holder to see if this is still classed as the same account or separate account. 

Thank you.

Hi How can you claim this back for years prior to current one. I was not aware of this rule and hence want to claim the relief back. Thanks and Regards 

Hi,

You can claim going back four years from the current tax year.  

You can do this by writing to:

HM Revenue and Customs
BX9 1AS
United Kingdom

Thank you.

Hello Admin, i have a related question on saving account interest in NRO account. The 30% tax was deducted at source bank but when I filed tax return in my home country most of it was refunded back.I wanted to understand in this case can I still use 15% tax spare relief though it is not NRE account. Thanks in advance for your response

Hi, 

You can only claim 15% relief on the tax actually paid, after you were refunded the tax on interest.

Thank you. 

Hi, Thanks for your quick response..in my case I got almost all of it back so no tax was deducted so does that mean I get no spare relief and need to pay 40% tax here in UK on that interest?

Hi,

If the tax deducted from the interest paid, was repaid. It means that when you declare the interest in your Self Assessment tax return, there is no foreign tax credit relief to claim and no foreign tax was paid.

Thank you.

Hello, Thank you for your response.Does that mean tax spare relief is only for NRE accounts? And not for NRO or savings account?

From the other discussion, HMRC suggested that 15% tax relief is available for 10 yrs since it was excersied. In my case my NRE account is more that 10 yrs old but never used this 15% tax relief on Indian interest income. Please could HMRC confirm if 10 yrs starts from onening of NRE bank account or from the date when first interest income was generated and reported in UK Self Assessment?

Hi Superbowl,

The relief is based on the interest actually paid.

As you have stated that some of the tax deducted has been refunded by the foreign bank you cannot then claim to have had this deducted.

The 15% is the maximum allowed for all interest received from that country irrespective of number of accounts.

Thank you. 



 

Hi,

UK tax relief is available for 10 years from the opening date of the NRE account per Article 24(5) UK-India Double Tax Convention.  

NRE interest income should be declared within an in individuals UK Self Assessment return.  

Tax relief is limited to a maximum of 15%.  

India: tax treaties

Thank you.

Dear HMRC Admin 25 and HMRC Admin 2, according to India tax treaties and advices from other HMRC admins in lot of other threads, we have learned that the 15% tax relief is available for the first 10 years of the NRE account opening even in the tax is not paid at all in India. The relief amount is calculated through the tax spared mechanism, which deems Indian tax to have been paid at the marginal rates applicable there. (UK-India DTC notes page HMRC’s Double Taxation Relief Manual DT9553). Thanks,

Hi I am in the UK for last 6 years. I never sent money to India from the UK. I have NRE account in India where I have fixed deposits. The money deposited was earned in Saudi Arabia & Trinidad and Tobago. Only recently I came to know that the interest money in India is taxable in the UK. My question is, if money was not earned in UK or India (was from Saudi and Trinidad) should the interest earn is taxable in the UK. With regards

Hi,

It does not matter where the money was earned, that is in the NRE account. The money in the account (capital) generated interest and it is the interest that is taxable in the UK.

Thank you.

Hi HMRC Admin - you have stated in the thread above that interest from NRE accounts (Indian Rupee denominated) held with Indian banks is subject to tax-sparing relief under the UK-India tax treaty for 10 years since the account was opened. Is the tax-sparing relief also available for interest earned on FCNR accounts (non-Indian Rupee denominated i.e. GBP, USD, EUR, JPY denominated accounts) held with Indian banks?