UK tax residents incorrectly assume that their rental income from their property in India is not reportable in their UK tax return because it is already taxable in India.
If you have received Indian property rental income whilst a tax resident in the United Kingdom, this needs to be reported in your UK tax return for the relevant tax year. A foreign tax credit is then available for offset against your UK tax liability on this overseas income.
In your Indian tax return, you are able to claim a standard 30% deduction from your gross annual rental income as a replacement for claiming actual property business expenses. It is important to note that this deduction does not apply in the UK so your gross rental income less actual expenses must be reported. You can however still claim the Property Income Allowance in your overseas rental income within your UK tax return.
You can read the UK & India Double Taxation convention where article 6 details the treatment of rental property income in either state.
If you have failed to report your overseas income in previous tax returns, you are required to report this via HMRC’s Worldwide Disclosure Service.
If you have international tax affairs requiring professional advice, please call us at 02033 259 341 or e-mail info@spondoo.co.uk for support.
