NRI FINANCIAL GUIDE
NRI Tax
UK-resident NRIs face tax obligations in both the UK and India. This guide explains how the UK-India double taxation treaty works, what Indian income must be reported to HMRC and how to avoid paying tax twice.
TL;DR
- UK-resident NRIs must report worldwide income to HMRC including Indian-source income such as NRO interest, rental income and capital gains
- The UK-India Double Taxation Avoidance Agreement (DTAA) prevents the same income being taxed twice
- NRE account interest is exempt from Indian tax but taxable in the UK -- it must be reported to HMRC
- NRO account interest is subject to 30% Indian withholding tax -- a UK tax credit is available for Indian tax paid
- Indian rental income and capital gains from Indian assets are taxable in both jurisdictions subject to treaty relief
Last reviewed: June 2026
The Tax Position for UK-Resident NRIs
A UK-resident NRI faces two separate tax systems: UK tax on worldwide income (if UK tax resident) and Indian tax on Indian-source income (as an NRI under Indian tax law). The UK-India Double Taxation Avoidance Agreement (DTAA), signed in 1993, prevents the same income being taxed in full in both countries by allocating taxing rights and providing for tax credits.
Determining UK tax residence is the starting point. The UK Statutory Residence Test (SRT) determines whether an individual is UK tax resident for a given tax year. Most individuals who live and work in the UK full-time are UK tax resident and therefore subject to UK income tax on their worldwide income. NRI status under Indian law is a separate determination -- being an NRI under FEMA or Indian income tax law does not make a person non-resident in the UK.
NRE Account Interest and UK Tax
Interest earned on NRE (Non-Resident External) accounts held in Indian banks is exempt from Indian income tax under Section 10(4) of the Indian Income Tax Act 1961. However, it is not exempt from UK income tax. UK tax residents must declare NRE account interest on their UK self-assessment tax return as foreign income. The UK-India DTAA does not exempt NRE interest from UK tax -- it is taxable in the UK in full.
NRO Account Interest and Tax Credits
Interest on NRO (Non-Resident Ordinary) accounts is subject to Indian income tax at a flat rate of 30% plus applicable surcharge, withheld at source by the Indian bank. UK tax residents must also declare NRO interest on their UK self-assessment return. Under the UK-India DTAA (Article 11), a UK tax credit is available for the Indian tax withheld, preventing double taxation. The credit is limited to the lower of the Indian tax paid and the UK tax that would otherwise be due on the same income.
Indian Rental Income
Rental income from Indian property received by a UK-resident NRI is taxable in India under the Indian Income Tax Act 1961, after allowable deductions including standard deduction and interest on loans. The same rental income must also be declared to HMRC as foreign property income. Under the UK-India DTAA (Article 6), income from immovable property may be taxed in India -- a UK tax credit is available for Indian tax paid on this income.
Capital Gains from Indian Assets
Capital gains arising from the sale of Indian assets (shares, property, mutual funds) by a UK-resident NRI are taxable in India under Indian capital gains tax rules. The same gains must be declared to HMRC. The UK-India DTAA allocates taxing rights on capital gains depending on the asset type. Indian capital gains tax rates and UK capital gains tax rates differ -- the lower of the two effective rates is the net tax cost after treaty relief.
Self-Assessment Reporting Requirements
UK tax residents with Indian-source income above de minimis levels must file a UK self-assessment tax return and declare the income in the foreign income sections. The relevant foreign tax credit claims are made in the same return. HMRC has published guidance on foreign income reporting. Penalties for failure to declare foreign income include interest on unpaid tax and surcharges.
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Disclaimer
This guide is for general information only and does not constitute legal, financial or insurance advice. Kaeltripton is an independent editorial publisher, not regulated by the FCA.
Frequently Asked Questions
Do NRIs have to pay tax in both UK and India?
The UK-India DTAA is designed to prevent double taxation -- the same income being taxed in full in both countries. Treaty relief (tax credits) means the effective tax cost is broadly the higher of the UK and Indian rates on any given income, not the sum of both. However, both must be declared to the relevant tax authorities.
Is NRE interest taxable in the UK?
Yes. NRE account interest is exempt from Indian income tax but is taxable in the UK as foreign income. UK-resident NRIs must declare NRE interest on their UK self-assessment tax return. No foreign tax credit is available as no Indian tax has been paid on it.
What is Article 11 of the UK-India tax treaty?
Article 11 of the UK-India Double Taxation Avoidance Agreement covers interest income. It allocates taxing rights on interest between the two countries and provides for reduced withholding tax rates and credits to avoid double taxation on the same interest income.
Do NRIs need to file a tax return in India?
NRIs must file an Indian income tax return if their total Indian-source income exceeds the basic exemption limit (Rs 2.5 lakh for most individuals, or higher for older individuals) in the relevant financial year. NRIs with only NRO interest income may not need to file if tax has been correctly withheld at source, but professional advice is recommended.
Sources
- UK-India Double Taxation Avoidance Agreement 1993 -- HMRC
- HMRC: Foreign income and the remittance basis -- HMRC
- Income Tax Act 1961, Section 10(4) -- NRE interest exemption -- Income Tax Department of India
- HMRC: Self-assessment foreign income guidance -- HMRC
