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Posted Tue, 20 Dec 2022 21:55:46 GMT by Saurabh Jain
Dear Team, I wish to know how to calculate gains for lumpsum received from Indian Public Provident Fund for the purpose of reporting it in offshore income/gains. Is it treated as pension and can I therefore deduct 1. the value as of 5th April 2017 from the total 2. Deduct an additional 25% from the remaining amount from point 1 above as tax free lumpsum. And report the remaining 75% balance as gain? Kindly advise. Thanks
Posted Thu, 22 Dec 2022 11:37:31 GMT by
Hi Saurabh Jain,

There is no relief for 'trivial commutation lump sum' for payments from an Indian pension.

 This means that the lump sum is taxable in India.

 It is also taxable in the UK.  

In the UK, the first 25% of the lump sum is tax free, with the remainder being taxable.  

You  would declare the taxable element on a Self Assessment tax return and claim tax relief for any tax paid in India on the lump sum.

Thank you. 



 
Posted Thu, 22 Dec 2022 11:56:14 GMT by Saurabh Jain
Dear Team, Thank you so very much for coming back to me on this. Can you please confirm that I can treat lumpsum received from Indian Public Provident Fund as an overseas pension and not treat it as savings/interest on savings? Thanks & Regards
Posted Fri, 23 Dec 2022 09:21:41 GMT by HMRC Admin 19
Hi,

Yes, this will be declared as a pension.

Thank you.
Posted Fri, 23 Dec 2022 12:01:14 GMT by
HI HMRC admin Won't it be considered as saving product because it has fix locking period and after 10 or 15 years it will be payable whole not like pension, which is payable after a certain age in the case of the PPF of India you can get after whole period even in the age of 35year
Posted Fri, 23 Dec 2022 16:52:33 GMT by HMRC Admin 2
Hi,

There is no relief for 'trivial commutation lump sum' for payments from an Indian pension.  This means that the lump sum is taxable in India.  

It is also taxable in the UK.  In the UK, the first 25% of the lump sum is tax free, with the remainder being taxable.  

You  would declare the taxable element on a Self Assessment tax return and claim tax relief for any tax paid in India on the lump sum.

Thank you.
Posted Sun, 15 Jan 2023 20:53:00 GMT by
Hi, I am trying to file the self assessment online but not able to find which section should be used to report the PPF lump-sum. Can you please help? Also, from the https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75550 I understand that the value of PPF before 6 April 2017 could be deducted from the final lump-sum amount (See Example 1). Is that understanding correct? Thanks! Mukesh
Posted Thu, 19 Jan 2023 14:55:05 GMT by HMRC Admin 19
Hi,

This should be reported as foreign income and as a pension within that section.

You will only qualify for relief of the amounts before 2017 if your pension scheme was not an employer-financed retirement benefit scheme immediately before 6 April 2017, for example, a personal pension scheme.

Thank you.
Posted Sat, 04 Feb 2023 22:23:43 GMT by
My Indian public provident fund (PPF) account has been recently closed by the bank, and I got a lump sum amount. This is an Indian government scheme, and I fully arranged it personally without the involvement of any employers. So, I assume it qualifies for relief of the amounts accrued before 2017 (as mentioned in the document eim75550 referred to above). Could you please confirm if the below calculation is correct? For example, if the lump sum received in Nov 2022 was £32,000. And the amount accrued before 6th April 2017 was £20,000. 1. Could you please confirm whether the amount to be declared for tax is £12,000 (£32,000 - £20,000)? 2. And also could you please confirm if I am eligible for a further 25% relief which will be £9,000 (£12,000 * 75/100)?
Posted Fri, 10 Feb 2023 11:33:56 GMT by HMRC Admin 32
Hi,

The starting point is that 100% of the lumpsum is taxable. EIM75550, advises that the lump sum prior to 6 April 2017, is not taxable, so this should be deducted from the lump sum. Of the remainder, a further 25% can be deducted in respect of a lump sum payable under an overseas pension scheme where an amount would not be liable to Income Tax if it was paid under a registered pension scheme. For this reason, deduct a further 25% from the remainder, as shown in your example.

Thank you.
 
Posted Thu, 18 May 2023 09:25:18 GMT by Karthik Murali
Hi, Do we make the declaration only if the overseas lumpsum has been transferred into UK? If it needs declaring, do we need to declare only the interest received on the final lumpsum or full lumpsum amount (subject to deductions stated above reg prior to 2017 and 25% on the remainder)?
Posted Wed, 24 May 2023 13:04:58 GMT by HMRC Admin 32
Hi,

if you are UK resdient and domicile, you need to report your worldwide income.

Tax on foreign income

Thank you.
Posted Thu, 08 Jun 2023 19:04:44 GMT by
Dear Sir/Madam, If the income related to PPF is filed in regular tax return in India, do we again need to declare in UK? Thanks & Regards
Posted Tue, 13 Jun 2023 12:31:51 GMT by HMRC Admin 32
Hi,

Withdrawals from the Indian Public Provident fund by a UK tax residents will be taxable in the UK as a pension, as described in Article 19 of the UK and Indian double taxation agreement: 2020 UK-India Synthesised text of the Multilateral Instrument and the 1993 Double Taxation Convention — in force. You need to declare this as foreign income on a Self Assessment Tax Return and claim Foreign Tax Credit Relief if you have paid tax in India.

Tax on foreign income

Thank you.
Posted Wed, 26 Jul 2023 19:52:23 GMT by Karthik Murali
Hi, How do we go about the declaration if we made contributions to the Indian PPF by transferring money from UK (Money earned as Income as taxed as PAYE) to India and then using the same to make yearly payments? The Indian PPF is made up of the principal component which was funded through my UK income (transferred to India) and the interest component. Would it suffice to declare the interest component earned from 7th April 2017 onwards (per EIM75550) till maturity?
Posted Thu, 03 Aug 2023 08:00:41 GMT by HMRC Admin 20
Hi Karthik Murali,

There is no need to report that you have paid into the PPF, but you will need to declare any interest that arises on a self assessment tax return, as it will be taxable in the UK.

Thank you.
Posted Mon, 20 Nov 2023 22:01:39 GMT by
I believe the information provided here for is for taxation of Employment Provident Fund (EFP) and is not correct for Indian Public Provident Fund (PPF). Please correct me if I am wrong. There are 2 Provident funds in India 1. Public Provident Fund - This is tax incentivised savings account product similar to a cash ISA in the UK and is accessible to anyone including children. It isn't linked to any employment and it is not possible to make employer contributions. The interest on this account is paid annually similarly to a cash ISA and is exempt from tax in India . This account has a nominal duration of 15 years which can be extended by 5 years at a time. It allows 50% lumpsum withdrawal after 7 years and 100% lumpsum withdrawal after 15 years. This does not meet the definition of an employment based or personal pension for taxation and should be treated as a savings product whereby the interest is taxable in the UK. 2. Employee Provident Fund (EPF) - this is an employment linked savings & pension product where both employees and employers contribute part of the monthly income to the scheme. The interest is credited annually and the amount in the EPF account cannot be normally be withdrawn until retirement age. Before retirement age, it can only be withdrawn under special circumstances and in case of the of short service where one has been unemployed for 2 months. The withdrawal is usually a lumpsum. This meets the definition of a trival commutation pension lumpsum and should be treated as a pension for taxation in the UK under Article 20 of the UK and Indian double taxation agreement
Posted Wed, 22 Nov 2023 16:45:07 GMT by HMRC Admin 20
Hi Merwyn,
Withdrawals from the Indian Public Provident fund by a UK tax residents will be taxable in the UK as a pension, as described in
Article 19 of the UK / Indian double taxation agreement: Article 19 — Governmental remuneration and pensions
Thank you.
Posted Wed, 22 Nov 2023 18:27:59 GMT by
Hello  Many thanks for the response. But reading the wordings of Article 19, the Public Provident fund does not fall under category described under Article 19 of UK/India DTAA as a) it isn't a remuneration paid for service rendered to the government in any contracting state b) it isn't a pension paid by the government for service to the government in any contracting state and c) it isn't a pension remuneration or pension paid in respect of services rendered to a trade or business. It is purely a savings product, that is not linked to retirement in any way. The account is held with banks and the interest on the account and all withdrawals are paid by the said banks. Article 19 states the below for reference — Governmental remuneration and pensions Remuneration, other than a pension, paid by the Government of a Contracting State to any individual who is a national of that State in respect of services rendered in the discharge of governmental functions in the other Contracting State shall be exempt from tax in that other Contracting State. Any pension paid by the Government of a Contracting State to any individual in respect of services rendered to that Government shall be taxable only in that Contracting State. The provisions of this Article shall not apply to remuneration or pensions in respect of services rendered in connection with any trade or business
Posted Thu, 23 Nov 2023 16:36:42 GMT by HMRC Admin 10
Hi
Article 19(1) of the UK/ India DTA covers remunedration and pensions from the Indian government.  
The term government means Government of a Contracting State or a political subdivision or local authority thereof.
 As article 19(1) decribes the taxation of remuneration, with an exception for a pension.  
This exception advises it is not exempt from tax in the other contracting state.  
You will need to seek professional advice if you require a more detailed reply.

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