Income from foreign NRE account

I used to transfer money from the UK to India for my savings, keeping it in my India NRE account. Now I am looking to buy a property in the UK, so I want to repatriate some of those savings back to the UK GBP account. Do you know how the UK tax works out for this (all the money in India's NRE account was from my UK salary which I have already paid the tax). I am not sure about the interests that I have earned from my NRE FCNR deposits over the period I will have to pay tax in the UK. And if yes, how is that calculated. The Indian NRE account is less than 10 years old. Thanks

Hi
As a UK resident all foreign income, including any interest from foreign accounts should be declared to the UK unless there is a double taxation exemption to negate this.
Tax on foreign income
There are no income tax implications of transferring capital from one account to another.
In terms of an NRE account, 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.
Thankyou.
Regards.

 

Hello HMRC Admin 10 - can you help me confirm: 1. which section should I use to put my NRE interested earned in my SA? 2. which section of my SA should I use to put in the 15% credit relief please? thank you

Hi.

You will need to declare this as foreign income. See guidance at:

Tax on foreign income

Thank you

 

Hello dear - thank you for the link I cannot find which section in my self assessment I need fill in my overseas interest earned and also which section I put the 15 percent credit relief ? Please can you share the section details on the self assessment so I can fill in there Thank you

Hi,
 

On Form SA106 on page F2, you would declare interest in the 'Remitted foreign savings income' box.  The 16% Foreign tax credit relief is declared in box 2 on page F1. Thank you.

thank you dear hmrc admin17

Hello HMRC, Did I misread your comments? Your comments - "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" Does this mean that if I have received a £5000 as Foreign interest from NRE Fixed deposits in a year with no tax paid in India. I can claim 15% credit tax relief i.e. £750 from my self assessment? I'm basic tax payer, and have been paying tax in UK at 20% for all my Foreign interest all these years without claiming any credit relief of 15%, as I thought we can claim relief only if taxes were deducted in other country. Please clarify. Thank you

Hi,

Double Taxation Avoidance Agreement (DTAA) provides for credit to be given for tax`spared` (not paid) in India under the provisions of Indian law set out in Article 24 (4).

This tax ‘spared’ relief is restricted to a period of 10 years from first exercised, see Article 24 (5).

Credit for `tax spared’ is limited to the amount of tax which would otherwise have been paid under the terms of the agreement. As per UK India DTAA interest can be taxed maximum @ 15% Article 12 (2). Thus, relief restricted to 15%.                                                                              

This means yes you can claim credit even though the tax has not been paid. You can claim this for previous years although you can only go back to 2019.

Thank you.

Thank you @hmrc for your response and the confirmation. But if a person earns 1000 in savings interest which is same as the savings allowance for basic tax payer, then the person can still claim 15% from Self assessment where no tax has been paid? that does not sound right to me. Finally, the interest is paid on Fixed deposit which matures after x years, so if we open another new Fixed deposit account for less than 10 years then hope it will still be eligible for the credit relief?

Hi,

The foreign tax credit would apply if tax was in fact due as the credit would then reduce your bill. You can claim if for a maximum of 10 years from when it is first exercised.

Thank you.

Hi What is the process to claim for last 3 years, 2018-2019 and 2019-2020,and 2020-2021 ; i never knew this and so never claimed" Do i have to revise my previous returns to claim it back or is there any specific form i can fill up and send over? Please guide! Thank you.

Hi 

You have 2 years from the date that the Self Assessment return is due to amend your tax return.  

E.g. 2020 to 2021 tax return cannot be amended after 31 January 2023.

Instead, you would need to submit an Overpayment Relief Claim (OPR).

Guidance on submitting an OPR claim in writing, can be found at:

SACM12150 - Overpayment relief: Form of claims

Thank you. 

 

As per the sa106-Foreign notes, it instruct to populate the Box2 if user wants to calculate the Foreign Tax Credit Relief (FTCR) manually or to leave it blank to use program calculate. I submitted all relevant foreign income in Column A-F for FY 2021-2022 hoping that website will automatically calculate FTCR with 15% relief but it doesn't do it. Should I put 15% of foreign income to Box2 so it get considered ?

Hi I have transferred some money to my Non-Resident saving account in India in 2020 & earned some interest. Already paid tax for the remitted amount ( employment + Capital gain tax). The interest received is used for the medical expenses of my parents. I was not aware this needs to be declared during the self assessment until now as it is a tax free in India. Total amount comes around 3500 pounds 1. Can I amend the self assessment for the period 2020-21 and submit SA106 (2020-21) please? 2. As the interest is not remitted back to UK, should I declare as un-remittable income on F1 page SA106? 3. Is there any tax relief even though box 2 on F1 page says only if foreign tax was paid? 4. Is there any option to deduct the expenses incurred ? eg > Transfer fee from UK to NRE account. 5. Should I omit the foreign income part on SA100 if I am submitting SA106? Please advise. Thanks in Advance

Hi nvsnl,

With the online Self Assessment tax return, you should complete all boxes, leaving box 2 blank. Follow the calculation to the end, to view how much tax is payable.  

If it is more than 15% of the foreign tax paid, you go back to the foreign section and add 15% into box 2.  

If the tax due per the calculation is less than 15% of the foreign tax paid, then you enter in box to an amount up to the tax due per the calculation.  

Once this is done, recalculate and follow the process to the end, allowing you to submit your tax return.

Thank you.

Hi Team If the interest is earned in the 2020 period, but the maturity date to receive this income is after April, 2021 , do I need to include this interest in 2020-21 tax period or 2021-22 tax period? ( In reality, the interest may NOT be received in the same year.)

Hi Joseph P
You can amend the 20/21 tax return before 31/01/23.  
You should only declare no on the SA106 if the country actually stops you from removing the income.
There is no tax relief - other then the personal savings allowace that covers both UK and foreing interest.
You cannot claim any expenses to reduce the figure.
Thankyou.
Regards.

Hi,

The interest needs to be declared in the tax year it is earned even if automatically put back into the account.

Thank you.