UK-Based NRIs — Indian Property Tax, SA106, HMRC, Remittance Basis

UK has approximately 1.9 million people of Indian origin (including British Indians and OCI holders), the largest Indian-origin population in Europe. Concentrated in London, Birmingham, Leicester, Manchester, and surrounding areas. UK's tax system has a unique remittance basis option for non-domiciled residents that affects Indian income reporting.

KEY UK SPECIFICS

Tax Authority: His Majesty's Revenue and Customs (HMRC) Tax Year: April 6 to April 5 (unique among major countries) Filing Deadline: October 31 (paper return) / January 31 (online); for tax payment: January 31 Tax Filing Form: SA100 (Self Assessment), with SA106 for foreign income Specific Forms: SA106 (foreign), SA108 (capital gains), SA107 (trusts), SA109 (residence/remittance basis) DTAA: India-UK Double Taxation Avoidance Agreement (1993, with later protocols) DTAA Article: Article 13 (Capital Gains), Article 6 (Income from Immovable Property)

UK TAX FILING REQUIREMENTS FOR INDIAN PROPERTY OWNERS

1. Resident vs Non-Resident vs Domiciled — UK tax depends on residence (Statutory Residence Test) and domicile status. UK-resident UK-domiciled — taxed on worldwide income. UK-resident non-UK-domiciled — option of arising basis (worldwide) or remittance basis (only foreign income brought to UK is taxed; subject to remittance basis charge after certain years).
2. Arising Basis (Default) — Indian rental income and capital gains taxable in UK as they arise; report on SA106 and SA108. Foreign tax credit for Indian tax paid.
3. Remittance Basis (Election) — For non-UK-domiciled residents; only Indian income remitted to UK is taxed in UK. Indian income kept in India (in NRO/NRE accounts) is not taxed in UK. Subject to remittance basis charge: GBP 30,000 per year after 7 of last 9 years UK resident; GBP 60,000 after 12 of last 14 years; GBP 90,000 after 17+ years (and at that point loss of remittance basis altogether). Personal allowance and CGT annual exemption forfeited under remittance basis.
4. Indian Rental Income on SA106 (Foreign) — Report gross rent, deduct mortgage interest (subject to UK restrictions for residential property post-2017 reform), repairs, management. Net included in property pages.
5. Indian Capital Gains on SA108 — Disposition of Indian property reported; UK CGT rates 18% (basic rate band) or 28% (higher rate band) for residential property (slightly different rates in 2024/25 reforms — verify current). Foreign tax credit for Indian tax.
6. Annual Tax Allowance — Personal Allowance GBP 12,570 (2024/25); CGT annual exempt amount GBP 3,000 (reduced from GBP 6,000 in 2023/24). Forfeited under remittance basis.
7. Inheritance Tax (IHT) — UK domiciled estate worldwide subject to IHT (40% above nil-rate band GBP 325,000). Indian property included in IHT for UK-domiciled. Non-UK-domiciled — only UK situs assets in IHT (Indian property excluded). Domicile is "sticky" — long-term UK residents become deemed UK-domiciled for IHT after 15 years of UK residence (deemed domicile rule).

INDIA-UK DTAA KEY PROVISIONS

Article 6 (Income from Immovable Property) — Indian rental income taxable in India.

Article 13 (Capital Gains) — Indian property capital gain taxable in India.

Article 24 (Elimination of Double Taxation) — UK gives credit for Indian tax paid; India also recognises UK tax for cases where UK is country of source.

Article 27 (Mutual Agreement Procedure) — for resolving disputes.

REMITTANCE BASIS DEEP DIVE FOR INDIA NRIs

The remittance basis is particularly relevant for Indian-origin UK residents who are non-UK-domiciled. Strategy:

1. Keep Indian rental income in NRO account in India — no UK tax on that income.
2. Sale proceeds of Indian property kept in India (e.g., reinvested in Indian property under Section 54) — no UK tax.
3. Funds remitted to UK from India — taxable in UK in year of remittance, with foreign tax credit.
4. Mixed accounts — careful structuring to avoid "tainting" clean capital with income.

After 7 of last 9 tax years UK-resident, must pay GBP 30,000 remittance basis charge to continue claiming remittance basis. Cost-benefit decision: if Indian income is high (rental + capital gains), remittance basis still beneficial despite GBP 30,000 charge; if low, switch to arising basis.

UK 2025 NON-DOM REFORMS (announced) — significantly limit remittance basis advantages from April 2025; new Foreign Income and Gains regime for first 4 years of UK residence; subsequent years worldwide tax basis. Verify current status with UK tax practitioner.

UK-INDIA INFORMATION EXCHANGE

Under CRS (effective India-UK from 2017), HMRC receives annual data on UK-resident persons' Indian bank accounts. Data includes account holder, balances, interest. HMRC cross-references with SA returns. Worldwide Disclosure Facility available for voluntary disclosure of past non-disclosure with reduced penalties.

REPATRIATION FROM INDIA TO UK

1. Indian process — NRO funds, 15CA/15CB, bank wire.
2. UK receiving — most major banks (HSBC, Barclays, Lloyds, Santander) handle international wires routinely.
3. For amounts above GBP 10,000-15,000 — bank may ask source of funds; provide Sale Deed, 15CB, FIRC.
4. Currency — INR-GBP volatile; consider hedging or multi-year repatriation.
5. UK reporting — repatriation triggers tax in UK if on remittance basis (in year of remittance); no separate report on arising basis (already taxed when arose).

UK INHERITANCE TAX TRAP FOR INDIAN PROPERTY

UK-domiciled (or deemed-domiciled after 15 years UK residence) estates pay IHT at 40% above GBP 325,000 nil-rate band on WORLDWIDE assets including Indian property. Many long-term UK Indian-origin residents are unaware they may be deemed UK-domiciled, making their Indian property potentially exposed to UK IHT. Mitigation:

1. Pre-deemed-domicile transfers (gift to children, settlement into Indian trust) — but UK IHT rules on gifts apply (PETs subject to 7-year rule).
2. Excluded property trusts — settled by non-UK-domiciled before deemed-domicile triggers — Indian property held outside UK IHT.
3. Domicile of choice — establish abandonment of UK domicile and adoption of Indian domicile in retirement (factual evidence required: residence, intention, ties).
   
   For complete details on selling property in India as an NRI and understanding the complete legal, tax, and repatriation process, visit our Selling Property in India page.