Do You Have to Pay Indian Income Tax as an Indian Citizen Working in the UK?
As an Indian citizen currently working in the United Kingdom (UK), whether you have to pay Indian income tax depends on several factors. It's crucial to understand your residential status and the source of your income to navigate these tax obligations correctly.
Residential Status
The Income Tax Act of India classifies your residential status based on the number of days you spend in India during the financial year from April 1 to March 31. Understanding your status is key to determining your tax liability:
If you are a resident, you are subject to tax on your global income in India. If you are a non-resident, you are only liable to pay tax on income earned or accrued in India.Income Source
The source of your income is another critical factor in determining your tax liability:
UK-based income: If you are earning income in the UK and are classified as a non-resident in India, you typically do not have to pay Indian income tax on that income.Indian-sourced income: If you have income from Indian sources such as rental income, business income, etc., that income may be subject to Indian tax.
Double Taxation Avoidance Agreement (DTAA)
India and the UK have a Double Taxation Avoidance Agreement (DTAA) that helps prevent the same income from being taxed in both countries. Under this agreement, you may be entitled to relief or exemptions on taxes paid in one country against taxes payable in the other. It's advisable to consult a tax professional who can provide personalized advice based on your specific situation and ensure compliance with both Indian and UK tax laws.
Filing Requirements
Even if you are a non-resident, you might still need to file an Indian tax return if you have income that is taxable in India. It's always better to consult a tax professional to understand your obligations and avoid any unintentional non-compliance issues.
Taxability Based on Residency and Source Rule
No citizenship has any direct relation to taxability in India. You are required to pay tax in India only on income received or earned in India.
Based on the tax laws, if you are classified as a non-resident as per Indian tax law, you generally need to pay tax on income received or accrued in India. Incomes earned outside India do not fall within the purview of Indian income tax. However, as a precautionary measure, if you hold an Indian Permanent Account Number (PAN) and earn no income, it is advisable to file a nil return every year. This can help you claim TDS refunds if applicable and prevent any notices for non-filing of tax returns.
General Guidelines
In general, tax obligations in India are based on two main rules:
Residence Rule: If you are a resident of India, all your income from any country is taxable in India. Source Rule: If you earn income from or in India, it is taxable in India, even if you are a non-resident.Citizenship, in this context, has relevance as it determines your residential status under Indian tax laws.