Taxablity and tds deduction for interest income of uk nri
This query is : Resolved
11 June 2016
Dear sir,
My client is NRI earn Rs. 150000 INTEREST income in india. He is of United Kingdom. whether he has to pay tax in India? What is the rate?
please suggest with correspondent to DTAA.
My client is NRI earn Rs. 150000 INTEREST income in india. He is of United Kingdom. whether he has to pay tax in India? What is the rate?
please suggest with correspondent to DTAA.
11 June 2016
Tax based on individual slab rate applicable. As the income is below taxable income no tax payable in India.
13 June 2016
Sir, whether TDS should be deducted by Interest Payer and if yes what is the rate of Deduction? and if tds has been deducted in USA , can we take the claim of tax deduction? Please suggest
26 July 2025
Here’s the detailed answer regarding taxability and TDS on interest income of a UK-based NRI:
### 1. Taxability of Interest Income for UK NRI in India
* Interest income earned by an NRI on Indian fixed deposits or securities is **taxable in India**.
* However, under the **India-UK DTAA (Double Taxation Avoidance Agreement)**, the tax rate on interest income is capped.
* **DTAA Rate:** The TDS rate is generally **15% plus applicable surcharge and cess** on interest income (subject to treaty benefits).
### 2. TDS Deduction by Interest Payer
* The payer (bank or Indian entity paying interest) **is required to deduct TDS** on interest income paid to NRI.
* The usual TDS rate for interest payable to NRIs is **30%** under Indian law, but under the India-UK DTAA, this can be reduced to **15%** (plus surcharge and cess).
* The NRI can submit **Form 10F and Tax Residency Certificate (TRC)** from UK tax authorities to the payer to avail the reduced TDS rate as per DTAA.
### 3. Tax Credit for Tax Paid Abroad
* If tax has been deducted or paid in the UK on the same interest income, the NRI can claim credit for such tax paid in the UK against the Indian tax liability.
* The credit claim is made under **Section 90/91 of the Income Tax Act**, supported by the DTAA.
* This avoids double taxation on the same income.
### Summary:
| Point | Details |
| -------------------------- | ---------------------------------------------- |
| Taxability in India | Yes, interest income is taxable |
| TDS Rate | 30% (Indian law), but 15% as per India-UK DTAA |
| Documentation for DTAA | Submit TRC + Form 10F |
| Tax Credit for UK Tax Paid | Allowed under DTAA, claim in Indian return |
---
If your client is below the basic exemption limit after all income and deductions, no tax may be payable, but TDS is still deductible at source unless DTAA certificate is furnished.
---
Would you like me to help draft a detailed advisory letter or the relevant forms for DTAA benefit claim?
### 1. Taxability of Interest Income for UK NRI in India
* Interest income earned by an NRI on Indian fixed deposits or securities is **taxable in India**.
* However, under the **India-UK DTAA (Double Taxation Avoidance Agreement)**, the tax rate on interest income is capped.
* **DTAA Rate:** The TDS rate is generally **15% plus applicable surcharge and cess** on interest income (subject to treaty benefits).
### 2. TDS Deduction by Interest Payer
* The payer (bank or Indian entity paying interest) **is required to deduct TDS** on interest income paid to NRI.
* The usual TDS rate for interest payable to NRIs is **30%** under Indian law, but under the India-UK DTAA, this can be reduced to **15%** (plus surcharge and cess).
* The NRI can submit **Form 10F and Tax Residency Certificate (TRC)** from UK tax authorities to the payer to avail the reduced TDS rate as per DTAA.
### 3. Tax Credit for Tax Paid Abroad
* If tax has been deducted or paid in the UK on the same interest income, the NRI can claim credit for such tax paid in the UK against the Indian tax liability.
* The credit claim is made under **Section 90/91 of the Income Tax Act**, supported by the DTAA.
* This avoids double taxation on the same income.
### Summary:
| Point | Details |
| -------------------------- | ---------------------------------------------- |
| Taxability in India | Yes, interest income is taxable |
| TDS Rate | 30% (Indian law), but 15% as per India-UK DTAA |
| Documentation for DTAA | Submit TRC + Form 10F |
| Tax Credit for UK Tax Paid | Allowed under DTAA, claim in Indian return |
---
If your client is below the basic exemption limit after all income and deductions, no tax may be payable, but TDS is still deductible at source unless DTAA certificate is furnished.
---
Would you like me to help draft a detailed advisory letter or the relevant forms for DTAA benefit claim?
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