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HMRC internal manual

Double Taxation Relief Manual

India: Notes

Students, trainees and researchers

Students, trainees and researchers from India are exempt from United Kingdom tax on gifts from abroad for the purpose of their maintenance, education, study, research or training, on certain grants and awards, and, in certain circumstances, on their earnings in the United Kingdom. The exemption does not extend to remuneration as an articled clerk or for services rendered to the person providing the training, and is not, in any case, to be given for a period of more than five years.

There is a further exemption from United Kingdom tax given to an individual from India who is present in the United Kingdom for a period of less than 12 months, who is employed by a resident of India and who is studying at a university etc. His earnings for services performed in the United Kingdom, if they do not exceed £1,500 or its Indian currency equivalent, are exempt from United Kingdom tax. Individuals who are or were residents of India and who participate in United Kingdom sponsored study, research etc. programmes are also exempt from United Kingdom tax for a period not exceeding twelve months on payments made by the Indian government for the purpose of their maintenance, study etc. (Article 21).

See also the guidance in DT1930 and 1931.

Tax spared

The agreement provides for credit to be given for tax ‘spared’ (see INTM161270-161280) in India under the provisions of Indian law set out in Article 24(4).

Section 80-IB of that Act has been agreed to be of a substantially similar character to the provisions in paragraph 4(a), and credit is due by virtue of Article 24(4)(b)..

Section 80-IC of the Indian Income Tax Act 1961, inserted by the Finance Act 2003, is not agreed as being substantially similar to those provisions referred to in Article 24(4)(a) and no credit will be due in respect of tax spared under that Section.

Relief is restricted to tax ‘spared’ in India for a period of ten years in respect of any one source of income.

Amounts of tax spared for which credit relief is given should be reported as mentioned in INTM161290.

Mutual agreement procedure

A Memorandum of Understanding (MOU) between India and the UK was agreed in 2004 regarding all cases under the Mutual Agreement Procedure, which can be accessed via the link below.

UK/India Memorandum of Understanding on Mutual Agreement Procedure cases

It provides that the UK and India will suspend the collection of any amounts of tax, including any related interest or penalties, for any taxable years which are subject to the Mutual Agreement Procedure in the UK/India Double Taxation Convention. This is subject to the provision of a bank guarantee by the taxpayer.