Two residence tests that never speak to each other
India decides who is resident by counting days across a year that runs from 1 April to 31 March. The UK decides the same question through the statutory residence test, across a year that runs from 6 April to 5 April, using criteria that have almost nothing in common with India's. Neither test looks at the other, and neither yields to it.
The result is that both systems can return "resident" for the same twelve months of your life. This is not a mistake or an edge case. It is the ordinary consequence of two independent domestic regimes, and it is exactly the situation the treaty was written to resolve.
The Convention between India and the UK was signed on 25 January 1993 and entered into force on 25 October 1993, taking effect in India from 1 January 1994 and for UK income tax and capital gains tax from 6 April 1994. It was amended by a protocol signed on 30 October 2012 that entered into force on 27 December 2013, and it has since been modified by the Multilateral Instrument. That is the version in force today, and it is the version any current analysis has to work from.
Article 4 decides residence, in a fixed order
Article 4(1) defines a resident of a Contracting State as any person who, under the law of that State, is liable to taxation there by reason of domicile, residence, place of management or any other criterion of a similar nature. If only one country's domestic law makes you resident, the enquiry ends there.
Where both do, Article 4(2) runs a sequence for individuals. Each test is applied in turn and the first one that produces an answer stops the process.
| Order | Test |
|---|---|
| 1 | The State in which you have a permanent home available to you |
| 2 | If a permanent home in both, the State with which your personal and economic relations are closer — your centre of vital interests |
| 3 | If that cannot be determined, or there is no permanent home in either, the State of habitual abode |
| 4 | If habitual abode is in both or neither, the State of which you are a national |
| 5 | If a national of both or neither, mutual agreement between the competent authorities |
Two things follow from that structure. The first is that "permanent home available to you" turns on availability, not ownership. A flat in Mumbai kept empty for visits is a permanent home available to you; the same flat let on a long lease generally is not, because it is no longer available. Many people who assume the test looks at where they spend most of their time discover it never reaches that question, because it is resolved at step one.
The second is that the tie-breaker settles residence for treaty purposes only. It does not undo your domestic residence status in either country. You may remain resident under both sets of rules, obliged to file in both, and reporting the same income twice. The treaty allocates taxing rights over particular items of income; it does not release you from either filing system. Our India residential status test and UK statutory residence test guides work through each domestic side separately.
Where the statutory residence test collides with the Indian year
The UK side of the collision has its own architecture. The statutory residence test works through automatic overseas tests first — fewer than 16 days in the UK if you were UK resident in any of the previous three tax years, fewer than 46 days if you were not, or full-time work overseas with fewer than 91 UK days and fewer than 31 days on which you work more than three hours in the UK. If none applies, the automatic UK tests follow: 183 days or more in the UK, the only-home test, or full-time work in the UK. If neither set resolves it, the sufficient ties test asks how many connections to the UK you have, with the number required falling as your day count rises.
The mechanism that catches returning and departing NRIs is not the day counts themselves but the calendars. The UK recognises split-year treatment, with eight distinct cases covering departures and arrivals; India does not. Indian residential status is determined for a whole tax year and applies to that entire year. So a mid-year move can leave you with a part-year UK position sitting against a full-year Indian one, over periods that begin and end six days apart.
UK pensions: the residence state takes them, with exceptions
Article 20(1) is unusually clean. Any pension other than one referred to in Article 19(2), or any annuity, paid to a resident of a Contracting State shall be taxable only in that State. That is an exclusive allocation — the other country has no claim at all, and there is no credit calculation to perform.
Article 20(2) defines a pension as a periodic payment made in consideration of past employment, or by way of compensation for injuries received in the course of employment, or any payments made under the social security legislation of either Contracting State. That last limb is what brings the UK state pension inside Article 20. Article 20(3) defines an annuity as a stated sum payable periodically under an obligation to make the payments in return for adequate and full consideration in money or money's worth.
Article 19(2) carves out government service pensions, which remain taxable only in the state that pays them. If your UK pension derives from service to the Crown or a local authority rather than private employment, Article 20 does not apply to it.
The harder question is the lump sum. Article 20(2) defines a pension as a periodic payment, so a one-off amount drawn from a UK pension is not obviously within the article at all. Where the treaty does not allocate an item exclusively, both countries can reach for it under domestic law and credit relief does the work instead — and the two countries' domestic treatments of the same payment can diverge sharply. This is the single most common place where the answer people expect is not the answer they get, and it is far better confirmed before you draw than after. Our guide to UK pensions and QROPS from India covers the transfer and drawdown mechanics in more detail.
Rental income runs on the opposite rule
Article 6(1) provides that income from immovable property may be taxed in the Contracting State in which the property is situated. The operative word is may, not only. Article 6 gives the country where the property sits a taxing right without taking anything away from the country of residence, so both can tax the same rent, and the residence state must then give relief under Article 24.
Running in each direction, that means:
- A UK resident letting Indian property. India taxes the rent as Indian-source income under its own rules; the UK taxes the same rent as foreign property income; the UK gives credit for the Indian tax under Article 24(1). The Indian computation starts from annual value, allows municipal taxes, a flat statutory deduction in place of actual repair and collection costs, and interest on borrowed capital. See NRI property rental income and TDS.
- An Indian resident letting UK property. The UK taxes the rent, and under the non-resident landlord scheme a letting agent — or the tenant directly, where there is no agent and the rent exceeds £100 a week — deducts basic rate tax before paying you, unless HMRC has approved receipt of rent gross on application. India taxes the same rent as part of worldwide income and gives credit under Article 24(2).
Because each country computes the taxable rent differently, credit is given for tax paid on the same income rather than on the same figure. The two numbers rarely match, and the residual is a real cost rather than a rounding difference.
How the credit is actually calculated
Article 24(2) allows a resident of India credit for UK tax paid on income from sources within the UK, "but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax". That is a proportionate cap tied to the income in question. If the UK has taxed an item more heavily than India would have, the excess is not refunded and generally cannot be reallocated to shelter other income. Article 24(1) works the same way in reverse, allowing Indian tax as a credit against UK tax computed by reference to the same income.
Two practical points do most of the damage. The first is timing: the credit is claimed on a prescribed statement filed electronically with your Indian return, and late or omitted filing of that statement is one of the most frequent reasons a properly available credit is refused. The second is the year mismatch — a UK tax year straddles two Indian ones, so the UK tax attributable to an Indian tax year has to be apportioned rather than lifted from a UK statement. Our guide to DTAA relief and the Tax Residency Certificate covers the claim process end to end.
The certificate and the form that carry the claim
Indian law makes a certificate of residence issued by the government of the other country a condition of claiming treaty relief. Under the Income-tax Act 2025 that requirement sits in section 159, carrying forward the rule previously found in section 90(4) of the 1961 Act.
For a UK resident, the document is HMRC's certificate of residence. Applying for one is not a formality: you must state the reason you need it, which double taxation agreement applies, the type of income and the relevant article, the period the certificate is to cover, and confirmation that you are the beneficial owner of the income and subject to UK tax on it. For periods after 6 April 2013 where no return has been filed, HMRC also asks for your days in the UK, your reasoning under the statutory residence test if fewer than 183, arrival and departure dates, and any split-year circumstances.
Alongside the certificate, India requires prescribed particulars. The e-filing portal now prescribes Form 41, under section 159 and Rule 75, as the form on which a non-resident furnishes the information needed to claim relief under a double taxation avoidance agreement. It is filed electronically and asks for your tax identification number in your country of residence and a copy of the residence certificate. Form 10F governed earlier periods, and the foreign tax credit statement has been renumbered under the new rules as well, so confirm on the portal which form applies to the specific period you are claiming for.
The certificate and the form are where most treaty claims fail. The legal position is usually straightforward; the evidence is what is missing.
What the Multilateral Instrument added
The MLI took effect for the India-UK Convention for UK withholding taxes from 1 January 2020 and for UK income tax and capital gains tax from 6 April 2020, and for Indian withholding taxes from 1 April 2020 and other Indian taxes for periods beginning on or after that date.
It made two changes that matter here. It inserted a preamble stating that the Convention is intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through avoidance, including treaty shopping. And it introduced a principal purpose test: a benefit is not granted if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of an arrangement or transaction, unless granting it would accord with the object and purpose of the relevant provisions.
The MLI also modified Article 4(3), which deals with dual-resident entities, requiring the competent authorities to settle the question by mutual agreement. It left the individual tie-breaker in Article 4(2) untouched. For a person with an ordinary life — a home, a job, a pension — the principal purpose test is rarely in play. It bites on arrangements built to reach the treaty rather than on people who simply live across two of them.
Compliance caveat
This guide describes the residence tie-breaker in Article 4, the pension and annuity rule in Article 20, the immovable property rule in Article 6 and the credit mechanism in Article 24 of the India-UK Convention as amended and as modified by the Multilateral Instrument, together with the UK statutory residence test in outline. It does not address capital gains under Article 14, dividends, interest, royalties or fees for technical services, employment income, business profits or permanent establishment questions, the UK's rules on domicile and foreign income and gains, FEMA residence — which is decided separately from income-tax residence and can differ from it — or estate and inheritance exposure in either country. Rates, thresholds, section numbers and form numbers change with each Finance Act and each set of rules, and several referred to here changed with the Income-tax Act 2025. This is a simplified guide, not tax advice. Global Investments is not authorised by the Financial Conduct Authority or by the Securities and Exchange Board of India. Confirm your position with qualified advisers in both jurisdictions before filing or acting on anything here.
How Global Investments can help
Treaty questions go wrong in two places: people assume the tie-breaker weighs their circumstances when it actually runs a fixed sequence, and they build a correct position without the certificate and forms that make it claimable. Our advisers work with clients living between India and the UK to establish where the Article 4 sequence actually stops in their case, map which income sits under an exclusive allocation and which is merely shared with credit relief, and sequence a move so the two tax years and the split-year rules work with the plan rather than against it. Where pensions, property or a business straddle both countries, we coordinate with Indian and UK specialists so the two sides of the analysis are built together rather than reconciled afterwards.
Frequently asked questions
Can I be tax resident in both India and the UK at the same time?
Yes, and it is common rather than exceptional. India counts your days across a year running 1 April to 31 March and applies its own thresholds, while the UK applies the statutory residence test across a year running 6 April to 5 April using entirely different criteria. Neither test looks at the other, so both can return "resident" for the same period of your life. The treaty does not prevent that overlap. It resolves it, by deeming you resident of one state for treaty purposes while leaving your domestic status in both countries intact.
Which test in the India-UK tie-breaker is applied first?
Article 4(2) runs a fixed sequence, and the first test that produces an answer ends the enquiry. It begins with the Contracting State in which you have a permanent home available to you. If you have a permanent home in both, it moves to your centre of vital interests, meaning the state with which your personal and economic relations are closer. If that cannot be determined, or you have no permanent home in either, it moves to habitual abode, then to nationality, and finally to mutual agreement between the two tax authorities. It is a sequence, not a balancing exercise.
Is my UK state pension taxed in India or the UK if I live in India?
Article 20(1) provides that any pension other than one falling within Article 19(2), or any annuity, paid to a resident of a Contracting State is taxable only in that State. Article 20(2) defines a pension to include payments made under the social security legislation of either country, which brings the UK state pension within the article. So for someone who is treaty-resident in India, the taxing right over a UK state pension sits with India alone. Government service pensions are the exception and are dealt with separately under Article 19(2).
Does the treaty stop India taxing rent from my Indian property?
No. Article 6(1) says income from immovable property may be taxed in the Contracting State in which the property is situated. The word is "may", not "only", so India keeps a taxing right over rent from Indian property regardless of where you live, and the country where you are resident keeps its own right to tax the same income. Double taxation is then removed by credit under Article 24 rather than by one country standing down. Rental income is the clearest example of the treaty sharing rather than allocating a source.
Do I need a UK certificate of residence to claim treaty relief in India?
Practically, yes. Indian law makes a certificate of residence issued by the government of the other country a condition of accessing treaty benefits, and for a UK resident that means HMRC's certificate of residence. Applying for one requires you to state which treaty applies, the type of income and the relevant article, the period covered, and confirmation that you are the beneficial owner and subject to UK tax on that income. Because the UK and Indian tax years do not align, a single Indian claim period may need certificates covering two UK years.
Has Form 10F been replaced under the Income-tax Act 2025?
For income falling under the new Act, yes. The Income-tax Department's e-filing portal now prescribes Form 41 under section 159 and Rule 75 for non-residents furnishing the particulars needed to claim relief under a double taxation avoidance agreement, and it is filed electronically along with your tax identification number in your country of residence and a copy of the residence certificate. Form 10F continues to govern earlier periods. Check the portal for the form applicable to the specific period you are claiming for rather than assuming.
Why is my Indian foreign tax credit smaller than the UK tax I paid?
Article 24(2) caps the credit at that proportion of Indian tax which the UK-sourced income bears to your entire income chargeable to Indian tax. The cap is applied by reference to the income in question, so where the UK has taxed something more heavily than India would have, the excess is simply not relieved and generally cannot be moved across to shelter other income. Differences in how each country computes the taxable amount, and the mismatch between the two tax years, widen the gap further.
This guide is general information only and does not constitute financial, legal or tax advice. Global Investments is not authorised by the Financial Conduct Authority or by the Securities and Exchange Board of India. Indian tax and exchange control rules change and individual circumstances vary. Always seek advice from a qualified adviser in the relevant jurisdiction before acting.