This is a follow-up question from my previous question. I have recently started working in the UK in January 2018, and I need to pay taxes and file ITR in India on my global income in UK for FY 2017-18. For the months of January to March, I have paid tax in UK which was deducted directly as is shown on my payslip. Now, my income for those 3 months did not fall in the taxable income bracket in the UK, so I have got a refund on that tax. Does this now mean that I cannot claim tax credit in India under DTAA? As technically, I have paid tax in the UK and the reason I got a refund was simply because that income was not substantial enough to pay taxes on. I have not claimed any benefit under DTAA when filing taxes in India, so do I still need to pay tax in India on the same amount or can I be exempted from paying tax? I am having a lot of trouble understanding the terms so I would greatly appreciate if someone could answer my question and help me file ITR in India. Please contact me on my email to discuss this further and I would be very happy to seek help with filing my ITR for this financial year. Thanks, Surabhi
Hi Surabhi,
Now, you will be liable to pay tax on that 3 month income in India.
It will be included in your total income in India and you will have to pay tax as per your slab rate.
As you have already got refund then the same will be not treated as double taxation income.
You can call me for further clarification.
Hi Payal, Technically, I have paid tax in the UK. It can be seen on my salary slips as tax deducted at source. Whether or not I get a refund on that tax should not affect my eligibility for DTAA, isn't that correct? The reason I got my tax back was because I should not have paid that tax in the first place. I have still paid taxes as per UK tax laws, it's just that the total tax amount came to be zero. Besides, I got my tax returns in the month of August. If I had filed my ITR in India in July before the deadline, I would have been eligible for tax benefit under DTAA. So why does the fact that I got a refund later change my eligibility for it?
Hi Surabhi
I got your point.
You can still show the tax paid in UK in your ITR filing and take the benefit.
But that doesn't mean you are not liable to pay tax in India.
Hi Surabhi,
Depending upon the nature of income and other factors, you can also take an argument that as per DTAA the income was taxable in UK and not in India.
However, in order to do so, you should consult with an expatriate exepert. The facts of your case are not straight forward and may require a specialist.
Hi, Thank you very much for your answer Lakshita. That clarifies a lot of things. Is there an expatriate expert here that can help me figure out whether my salary which is earned in the UK in a UK bank account is eligible for tax in India as well? I have been trying to read the articles within the DTAA between India and the UK and it seems that some forms of income are only to be taxed in the country where that income is earned, and should not be taxed again in the other country. That would effectively mean that my earning in the UK for the months of January to March should not be taxed in India, regardless of whether that income fell under the taxable income slab in the UK or not. I need someone to help me clarify the clauses in the DTAA and help me avoid paying excessive tax in India. Please contact me on my personal email address - surabhip21 at gmail as I have to pay for every follow-up question here and it is difficult to get proper clarity that way. Thanks!
Hi.
While you have paid taxes in Uk, technically as the amount was not taxed and the tax paid by you was refunded the income is not doubly taxed in Uk and India.
As the name suggest benefit under DTAA ie double taxation avoidance agreement tax credit can be claimed only if income is taxed in both the countries. In your case this is not the fact. You have actually not had any tax liability in Uk. In India since you are resident your global income is taxable.
I would like to say that I don't think your salary income will be taxed in India because as per DTAA between India and UK, article 23 para 3 covers other income which clearly states that any other income earned in other country will be taxed in that country which means that your salary income will be taxed in UK and not India.
Hi Surabhi,
As per my opinion, you will be liable to pay tax in India for that 3 month income.
Hi Surabhi,
In my opinion, the income earned in UK will be clubbed with your Indian Income and will be chargeable to tax in India. Since you have not paid any taxes in UK, there is no question of taking DTAA benefit in India. The intent of law is to protect an individual from double taxation but in your case there is no double tax.
Regards,
Nikhil.
My advise is to pay taxes so that there are no issues later.
Regards,
Nikhil.
Please note that relevant article for you is Article 16.
I have reproduced the extract below:
Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall not be taxed in that other State if :
(a) he is present in the other State for a period or periods not exceeding in the aggregate 183 days during the relevant fiscal year;
(b) the remuneration is paid by, or on behalf of, an employer who is not resident of that other State; and
(c) the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State
Sorry, but I don't have an answer for you as I am not expatriate tax expert.
Hi Surabhi,
It is very clear case as your income will not be considered as doubly taxation.
You will be liable for tax in India for the income earned in UK.
Simply, just pay the taxes so that there are no issues later.
Hi Surabhi,
There is no need of any expertise in your case.
It is very simple.
Your income is not doubly taxed so you can not take the benefit of DTAA.