Question about foreign income

katp1984

Hello everyone,

I wonder if some of the experts on here will be able to help me. I am a BR tax payer with dual citizenship (British and Indian). I am mainly resident in Britain.

I pay tax via PAYE. I recently have received some money in India through a property sale/inheritance. I have paid the required inheritance and CGT due in India.

The money is currently in an Indian equivalent of an ISA so no tax is due in India. My question is whether I will be liable for tax in the UK? If so, would I still have to pay tax if I left the money in India? I know India has a double taxation agreement with the UK - does this make a difference?

Secondly, I have transferred some money from the UK (when the exchange rate was very favourable) into the same account. Should this money be treated differently (as it is from UK income). I hope to transfer the money back once the account matures and if the exchange rate is favourable. If I make a profit/loss on the exchange rate, is this taxable/deductible?

Thanks, Hope it made sense!

00ec25

in simple terms, if you are resident in the UK for tax purposes - the definition of which is not governed by your (dual) nationality - then you are taxed on your worldwide income / gains by the UK, however, credit is given for any tax you have paid overseas where a DTT exists

Cook_County

You may of course not be domiciled in the UK even though resident; and you may elect the remittance basis.

You may have a taxable gain on the foreign currency matter.

katp1984

Thanks for your replies!

So if I understand you correctly, I would still have to pay tax on the interest (in the UK) even though it is in a tax free wrapper in India?

Secondly, would should I be declaring this? i.e as soon as the deposit matures? or when I decide to bring the money over to the UK?

I am slightly confused as the interest will be in Rupees - so the value in GBP will fluctuate (by upto 20%:eek:) depending on the exchange rate.

Thanks

PS: I am pretty sure I am domiciled in the UK (I live in the UK most of the year) but just for clarification what does being domiciled in the country entail?

thanks

katp1984 wrote: »

Thanks for your replies!

So if I understand you correctly, I would still have to pay tax on the interest (in the UK) even though it is in a tax free wrapper in India?

Yes

Secondly, would should I be declaring this? i.e as soon as the deposit matures? or when I decide to bring the money over to the UK?

When the deposit matures (in the tax return for the financial year in which it matures) and not when you bring the money over (unless you opt for remittance basis, when you pay a flat charge of £30000 increasing to £50000 from 2012)

I am slightly confused as the interest will be in Rupees - so the value in GBP will fluctuate (by upto 20%:eek:) depending on the exchange rate.

You have to pay capital gains tax on the gain but I think that is being abolished from 2012 tax year.

Thanks

PS: I am pretty sure I am domiciled in the UK (I live in the UK most of the year) but just for clarification what does being domiciled in the country entail?

Domicile usually follows your fathers domicile. If your parents are born in India and you are born in India, you are domiciled in India. Foreign Domicile has some advantages.


I am not an Tax advisor. These informations is from my understanding reading about it. So please get professional help for confirmation. Read about 'arising basis' , 'remittance basis' & domicile in HMRC - http://www.hmrc.gov.uk/cnr/hmrc6.pdf