Which types of income qualify for DTAA relief?

The India–UK DTAA covers dividends, interest, royalties, professional income, and capital gains. For most investors this means dividends from UK shares, distributions from UCITS ETFs, interest from gilts or listed bonds, and gains on financial assets.

What happens if I do not file these UK forms?

Default rules may apply. Certain interest can be withheld at 20 %. You can usually reclaim the excess later, but there is cash drag and a time limit for UK repayments. Ordinary dividends remain at 0%.

Why do I still have to pay tax in India after UK tax is withheld?

India taxes residents on global income. If UK tax was deducted, claim a Foreign Tax Credit in India through Form 67 and pay only the balance needed to reach your Indian rate.

Does the DTAA protect me from UK inheritance tax?

No. The DTAA covers income taxes only. UK inheritance tax applies separately to UK-situs assets. Many London-listed UCITS ETFs are Irish-domiciled and are usually not UK-situs, while UK-incorporated shares and UK gilts are typically UK-situs.

How are dividends and interest taxed under the India–UK treaty?

For dividends, ordinary company dividends are paid at 0% UK withholding. For interest, the treaty limits UK withholding to 15%, or 10% when paid by a bank. Many payments are paid gross under UK domestic rules.

What if I earn income in both India and the UK?

If you qualify as a tax resident in both countries, the treaty uses tie-breaker rules to decide primary residency. These consider permanent home, centre of vital interests, habitual abode, and nationality. If still unresolved, the authorities decide by mutual agreement.

What if I do not have a TRC when filing my Indian tax return?

You can file your return, but you should obtain and submit the Tax Residency Certificate and Form 10F if required to support your Foreign Tax Credit claim. Apply for the TRC in advance to avoid delays.

India-UK DTAA Explanation | Avoid Double Tax on UK Income

Q: Do I need to submit any form to get treaty rates in the UK?

For ordinary UK company dividends, no form is needed because the UK withholds 0 %. For interest where UK withholding may apply, use DT-Individual with your Indian TRC to apply the treaty rate or claim a repayment. UCITS ETFs typically pay distributions gross once a simple non-resident declaration is on file.

Many Indian investors today have started to use Paasa to hold UK Stocks like Unilever (ULVR), Shell (SHEL) or HSBC (HSBA), along with UCITS ETFs such as Vanguard FTSE 100 (VUKE), and gilts (UK government bonds).

What many do not realise is how two different tax systems can make global investing complex. The India–UK Double Taxation Avoidance Agreement (DTAA) simplifies this by ensuring your cross-border income is taxed only once, with both countries recognising taxes already paid.

This guide explains how the treaty works, where it applies, and how Paasa helps Indian investors stay globally invested while remaining fully compliant.

What Is Double Taxation?
What is the India–UK DTAA Treaty?
Residency rules under DTAA
Source vs Residence (Who gets to tax what)
How DTAA Applies to Dividends, Interest & Capital Gains
How to Avoid Double Taxation
Example 1: Interest income (when coupon is paid in UK)
Example 2: Dividend Income from UK Stocks and ETFs
Common Mistakes Investors Make
Conclusion
FAQs

What Is Double Taxation?

When you earn income in one country but live in another, both countries may try to tax the same income. This overlap is called double taxation.

Example: You are an Indian resident investing in Unilever plc (ULVR) or the Vanguard FTSE 100 UCITS ETF (VUKE) on the London Stock Exchange.

For ordinary UK company dividends and most UCITS ETF distributions, the UK deducts 0% at source.
When you file your return in India, you must declare that same income because India taxes global income.
Since the UK rate is 0%, there is no foreign tax credit to claim. India taxes the dividend in full at your slab rate.

The Double Taxation Avoidance Agreement (DTAA) confirms these taxing rights so the same income is not taxed twice and compliance stays straightforward.

	Without DTAA	With DTAA
Investor	Indian resident holding Unilever plc (ULVR) or VUKE via Paasa	Indian resident holding Unilever plc (ULVR) or VUKE via Paasa
Dividend received	£25,000	£25,000
Tax withheld in the UK	£0 (0%)	£0 (0%)
Tax payable in India (30% slab)	£7,500	£7,500
Credit allowed for UK tax paid	❌ None	❌ None (0% UK WHT)
Final tax payable in India	£7,500	£7,500
Total tax paid overall	£7,500 (single effective tax)	£7,500 (single effective tax)

Note: If you earn interest from gilts (UK government bonds) or certain listed bonds, payments are often made gross (no tax or fees are deducted) as well. Where any UK withholding appears, treaty relief and a Foreign Tax Credit in India apply.

What is the India & UK DTAA Treaty?

The India–UK Double Taxation Avoidance Agreement (DTAA) is a tax treaty that ensures the same income is not taxed twice: once in the country where it is earned (the source) and again in the country where the investor lives (the residence).

For Indian residents earning in the UK through dividends, interest, UCITS ETF distributions, or gilts (UK government bonds), this treaty keeps your total tax fair and compliant.

It applies to individuals, companies, and trusts that are tax residents of either India or the UK and covers most types of cross-border investment income, including:

Dividends from UK companies
Interest from gilts, listed bonds, deposits, and fund interest distributions
Royalties/fees for technical services (for completeness)
Capital gains on financial assets, subject to limited property-related exceptions under UK law

In simple terms, the DTAA works through two mechanisms:

Allocating taxing rights: It defines which country has the primary right to tax each category of income.
Granting relief: If both countries tax the same income, the country of residence allows a tax credit for taxes already paid abroad, so you are not taxed twice.

You can read the official India–UK DTAA text on the government site, see here.

For a practical investing workflow for this market, read Invest in UK from India.

Residency rules under DTAA

The treaty’s first step is to decide where you are a tax resident. If you are considered a resident in both India and the UK during a financial year, the treaty’s tie-breaker decides which country treats you as its resident for tax purposes.

For example, if you live in India but spend significant time working in the UK (or are on UK payroll), you might appear resident in both systems. The tie-breaker then resolves it in this order:

Permanent home: Where you have a fixed home available.
Centre of vital interests: Where your personal and economic relations are stronger.
Habitual abode: Where you stay more frequently.
Nationality: If still unresolved, your country of citizenship.
Mutual agreement: In rare cases, the two tax authorities decide by mutual agreement.

Why this matters: DTAA benefits apply only to residents of one of the treaty countries. For most Indian investors earning UK income from listed shares, UCITS ETFs, gilts or listed bonds, India will be the country of residence and the UK will be the source.

Source vs Residence (Who gets to tax what)

The treaty divides taxation rights between the country of source (UK) and the country of residence (India).

Type of Income	Taxed in Source Country (UK)	Taxed in Residence Country (India)
Dividends (regular UK companies)	No. UK pays dividends gross. WHT 0%.	Yes (no foreign tax credit)
UCITS ETF distributions	Usually no. Paid gross to non-residents with a non-resident declaration.	Yes (no foreign tax credit if paid gross)
Interest (gilts, listed bonds, deposits, fund interest)	Often no WHT in practice. Where withheld, treaty cap 15%.	Yes (with credit for UK tax actually paid)
Capital gains from sale of shares or securities	No for ordinary shares and most ETFs	Yes

Note: “Gross” means before any tax or fees are deducted. “Net” means after withholding or charges.

How DTAA Applies to Dividends, Interest & Capital Gains

When Indian investors earn income from UK assets such as stocks, UCITS ETFs, or gilts, the UK may deduct tax at source on some payouts. Under the India–UK DTAA, ordinary dividends are paid at 0% withholding, so India taxes them in full at your slab rate.

How it works for dividends:

Dividends

By default, the UK withholds 0% on dividends paid by regular UK companies. These are paid gross (no tax or fees deducted).
No forms are needed for ordinary company dividends to be paid at 0%.
UCITS ETFs listed in London are typically Irish or Luxembourg domiciled and usually pay distributions gross (no tax or fees deducted) to non-residents once a simple non-resident declaration is on file with your platform.

UK Dividend Withholding Tax Rate

Scenario	UK WHT Rate
Ordinary dividend from a UK company	0%
UCITS ETF distribution (Irish or Luxembourg domiciled)	0% (usually paid gross with non-resident declaration)

Note: Since the UK rate on ordinary dividends and most UCITS ETF distributions is 0%, there is no foreign tax credit to claim in India. You report the gross dividend and pay Indian tax at your slab rate.

Interest

Interest income from UK gilts, listed bonds, or fixed-income ETFs may face UK withholding at source in some cases.
Under the India–UK DTAA, if withholding applies it can be reduced to 15% once treaty paperwork is approved (DT-Individual with an Indian TRC). Some bank-paid interest can be limited to 10%.

UK Interest Withholding Tax Rate

Scenario	UK Interest WHT Rate
No treaty paperwork or relief where UK WHT applies	20%
DT-Individual approved (treaty relief)	15%

Note: Many common payments are paid gross (0%) under UK rules, for example quoted Eurobond coupons and most bank deposit interest. In those cases, India taxes the full amount and no UK credit is needed.

Capital Gains

Under the India–UK DTAA, capital gains from the sale of UK securities such as listed stocks and most ETFs by an Indian resident are taxed only in India, not in the UK, except for disposals involving UK land or property-rich companies.

The UK does not levy capital gains tax on non-resident investors selling ordinary UK-listed securities.
Indian residents must report and pay capital gains tax in India as part of their global income.
The applicable Indian tax depends on the holding period:
- Long-term capital gains on foreign shares held more than 24 months: 12.5% without indexation.
- Short-term capital gains (24 months or less): taxed at the investor’s income-tax slab rate.

Note: For overseas fund or ETF units such as UCITS, India generally applies a 24-month test for LTCG and STCG.

How to avoid double taxation?

Once both countries have exercised their taxing rights, the DTAA ensures you receive relief through India’s Foreign Tax Credit (FTC) system.

Here’s how it works:

If the UK withheld 15% on bond or gilt interest and your Indian slab rate is 30%, India allows a credit for the 15% already paid abroad.
You pay only the remaining 15% in India, so your total tax equals your Indian rate, not both countries’ taxes added together.

Note: Many gilt and listed-bond payments are paid gross (0%) under UK rules. In those cases India taxes the full amount and no UK credit is needed. Paasa streamlines this process with clean income summaries and ready-to-file tax reports.

Example 1: Dividend income from a UK stock or UCITS ETF

Imagine an Indian resident investing in Unilever plc (ULVR) or a London-listed UCITS ETF such as the Vanguard FTSE 100 UCITS ETF (VUKE).

Ordinary UK company dividends are paid gross at 0% UK withholding.
Most UCITS ETF distributions are also paid gross to non-residents once a simple non-resident declaration is on file with the platform.
Since no UK tax is deducted, India taxes the gross dividend at your slab rate and no foreign tax credit is available.

Example: The portfolio pays £250,000 in dividends this year. Indian slab rate 30%.

Paasa’s role

Ensure the non-resident declaration is correctly captured for UCITS ETFs so distributions are paid gross.
Produce clean dividend summaries for Indian filing.
Flag any items that do have UK withholding (for example, certain interest) and prepare Form 67 only when a credit is actually available.

Example 2: Dividend Income from UK Stocks and UCITS ETFs

An Indian investor using Paasa may hold Unilever plc (ULVR), Shell plc (SHEL), HSBC Holdings plc (HSBA), or London-listed UCITS ETFs such as Vanguard FTSE 100 UCITS ETF (VUKE) or iShares Core FTSE 100 (ISF).

UK companies and most UCITS ETFs pay dividends with 0% UK withholding. No form is needed for ordinary dividends.
The investor receives the full gross dividend in the Paasa account.
In India, the investor declares the gross dividend as part of global income and pays tax at their slab rate.

How DTAA helps

The DTAA allocates taxing rights so ordinary UK dividends are taxed in India only. The UK does not withhold.
If any UK tax is ever deducted on another income type, for example certain interest, it can be credited in India via Form 67.

Example: The portfolio generates £20,000 in annual dividends.

Paasa’s role: Paasa prepares clean dividend summaries for Indian filing, ensures the non-resident declaration is on file for UCITS so distributions are paid gross, and generates a Form 67 package only when a credit is actually available.

UK Inheritance Tax (What the DTAA does not cover)

Some investors assume the India–UK DTAA protects them from inheritance or estate taxes. It does not. The DTAA covers income and capital-gains taxes, not UK Inheritance Tax (IHT).

If something happens to the investor, heirs may face UK IHT of up to 40% on UK-situs assets above the nil-rate band (currently £325,000). For individuals who are non-UK domiciled and not long-term UK residents, the UK generally charges IHT only on UK-situs assets.

What this means in practice

UK-incorporated shares such as Unilever plc (ULVR), Shell plc (SHEL), and HSBC Holdings plc (HSBA) are usually UK-situs, so they can fall within IHT.
Gilts and many UK-issued bonds are also UK-situs for IHT.
Many London-listed UCITS ETFs are Irish-domiciled. Their units are typically not UK-situs, so they are generally outside UK IHT for investors who are non-UK domiciled and not long-term UK residents.
Paasa helps investors manage UK IHT exposure by favouring non-UK-situs fund structures where appropriate, while keeping portfolios FEMA-compliant and tax-efficient.

Common Mistakes Investors Make

Even experienced investors slip up on India–UK tax for markets and bonds. These are the most common ones to avoid:

Assuming UK dividends are taxed at 15%
Ordinary UK company dividends are paid gross (0% UK WHT). Treating all dividends as 15% leads to wrong Foreign Tax Credit claims.

Skipping Form 67
Missing this filing risks losing eligibility for India’s Foreign Tax Credit (FTC) even if UK tax was deducted on interest.

Not filing the non-resident declaration for UCITS ETFs
Most Irish or Luxembourg UCITS pay distributions gross to non-residents once a simple declaration is on file. If your platform never collected it, payments can be held back or misreported.

Not reporting foreign assets in Schedule FA
Every overseas account and holding must be disclosed in your Indian return. Non-disclosure can trigger scrutiny and jeopardise FTC later.

Forgetting treaty paperwork on interest
Where UK withholding applies to gilts or listed bonds, submit DT-Individual with your Indian TRC to apply the treaty cap (15% or 10% for bank payers) or claim a refund.

Mixing up capital-gains rules
The UK generally does not tax non-residents on gains from ordinary UK shares and most ETFs. Do not try to claim FTC where no UK CGT exists; apply Indian holding-period rules correctly (24 months for foreign shares, 36 months for overseas fund units such as UCITS).

Treating SDRT/PTM as a tax credit
UK Stamp Duty/SDRT (0.5%) and the £1 PTM levy are costs that adjust your cost basis. They are not creditable taxes.

Conclusion

The India–UK DTAA ensures that Indian residents earning from UK sources are taxed only once on the same income. Applying it correctly, recognising 0% withholding on ordinary dividends, claiming relief and interest where applicable, and filing Form 67 helps you stay compliant and protect post-tax returns.

About Paasa

Paasa is the India-first gateway for compliant global investing, trusted by HNIs, family offices, and professionals with cross-border income. It enables seamless diversification into the U.S.,Europe, China, Japan, and other major markets.

What sets Paasa apart is its India-centric compliance layer for cross-border investors:

FEMA, LRS, and DTAA checks integrated into every transaction.
Built-in tax analytics and reporting for Indian residents investing overseas, covering LTCG, STCG, dividend tax, and TCS tracking.
End-to-end support for remittance setup, reconciliation, and tax-credit documentation such as Form 67.

Whether you invest in U.S. equities, global ETFs, UCITS funds, or managed strategies, Paasa provides one transparent platform that keeps your global portfolio aligned with India’s tax and regulatory rules.

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Disclaimer

This article is intended solely for information and does not constitute investment, tax, or legal advice. The material is based on public sources and our interpretation of prevailing regulations, which are subject to change. Investing in global markets entails risks—this is including currency risk, political risk, and market volatility. Past performance does not predict future outcomes. Please seek advice from qualified financial, tax, and legal professionals before acting.

India-UK DTAA (Prevent Double Taxation for Indian Investors)