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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4803
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am a British ( of Indian origin )passport holder and have

been living here since 1975.few... Show More
been living here since 1975.few years back I came to know that our ancestral agricultural property has been acquired by the government of punjab india and they were offering compensation money for it. My fathers (92 years old living in India) name was also in the list among other beneficiaries( my fathers cousins etc). Since it was an ancestral property, my fathers cousins distributed that money to the children as according to Indian law children could ask for their share of ancestral property in fathers life time. My father has a very young girl friend and he didn't want to give any share of it to his children we 3 sisters.so we decided to file a case against him asking for our share in his life time. After a year through court he agreed to give our shares. This money is at the moment in India in an NRO account which is going to be transferred into NRE account meaning (fully repatriable account).i have googled a lot on tax issues. there is no tax on this money in India (special provision by punjab government for 2 years.my questions are...... 1.is there any inheritance or gift tax I have to pay if it is transferred through Indian bank to my uk bank. 2.does this money comes under gift, property or something else as this is an ancestral property. 3.can I leave this money in India for some time as interest rates are very good there. After 5 or 6 years can I bring it back without paying any tax here. Will there be any tax on interest earned there. 6. Can my sisters or father give me some of this money to me as gift directly through bank If that is easier from paper point of view. I'm very confused and don't know the easy option. My father may not survive for 7 years.does it mean I will have to pay inheritance tax after his death.this money has not been given through will but I got it because I had right to claim it from my father.its all confusing. Please tell me the best way out.its around £100,000 .vasanti barnwal.
Submitted: 1 year ago.
Category: Tax
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taxadvisor.uk, Chartered Certified Accountant
Satisfied Customers: 4803
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
replied 1 year ago.
Hello and welcome to the site. Thank you for your question.
If I understanding is correct, your father is living in India and has never lived in the UK.
This being the case, UK IHT rules do not come into play as far as his wealth is concerned.
Now coming to your questions -
1.is there any inheritance or gift tax I have to pay if it is transferred through Indian bank to my uk bank.
Ans - No, you don't have to pay any IHT or Gift tax on receipt of this money. There is no gift tax in the UK. the recipient of the gift receives the money free of taxation.
2.does this money comes under gift, property or something else as this is an ancestral property.
Ans - the money transfer to you would be treated as a gift.
3.can I leave this money in India for some time as interest rates are very good there. After 5 or 6 years can I bring it back without paying any tax here. Will there be any tax on interest earned there.
Ans - You can leave the funds in India and earn a better rate of return. This interest would be taxable in the UK as you would be taxed on worldwide income and gains as a UK resident for tax purposes.
6. Can my sisters or father give me some of this money to me as gift directly through bank If that is easier from paper point of view.
Ans - Your father or sisters can can you this money as gift directly through their bank account.
I'm very confused and don't know the easy option. My father may not survive for 7 years.does it mean I will have to pay inheritance tax after his death.this money has not been given through will but I got it because I had right to claim it from my father.its all confusing. Please tell me the best way out.its around £100,000.
I wish your father a long life...
You will not have to pay inheritance tax as IHT is payable out of the estate of the deceased.
I hope this is helpful and answers your question.
If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer reply replied 1 year ago.
Thanks for your very prompt reply.if this money is treated as gift iand can be transferred through my NRO account to uk account do I need to produce documents here and if so, when 1.. Am I right to understand that There is no need to get this money transferred through my sisters or my fathers account if it's a straightforward case of transferring from my Indian account into my uk account.2.how much is tax payable here on my interest earned there.3. Can I use that interest money in India buying things and gifting things there and whenever it is possible bring back the principal money only.will There be any tax on the principal amount?
Customer reply replied 1 year ago.
Can I bring this money in stages eg £20 000 every time with some game.is there any time limit to bring whole money?
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Vasanti, thank you for your reply.
[q]
if this money is treated as gift iand can be transferred through my NRO account to uk account do I need to produce documents here and if so, when
[a]
You should make your bank in the UK aware of an impending transfer of funds from India to comply with Money Laundering Regulations. Some form of documentaion would be helpful to confirm that the funds being transferred are funds gifted by your father as part of distribution of ancestral property in India.
[q]
1.. Am I right to understand that There is no need to get this money transferred through my sisters or my fathers account if it's a straightforward case of transferring from my Indian account into my uk account.
[a]
If you are able to transfer funds from a bank account in India to an account here (both accounts being in your name) then you don't have to use your father's or sisters' accounts as a mechanism.
[q]
2.how much is tax payable here on my interest earned there.
[a]
Interest earned/received attracts tax at your marginal rate of income tax. If you are a basic rate tax payer then the rate is 20%
[q]
3. Can I use that interest money in India buying things and gifting things there and whenever it is possible bring back the principal money only.will There be any tax on the principal amount?
[a]
You would have paid tax in the UK on that interest received. You can spend it as you like..
There would be no further tax to pay on remittance of principal and/or interest received.
[q]
Can I bring this money in stages eg £20 000 every time with some game.is there any time limit to bring whole money?
[a]
You can bring the funds to the UK as and when you like.. there is no upper limit on what you can transfer into your bank account here.
I hope this is helpful and answers your question.
If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.
Customer reply replied 1 year ago.
With some gap I meant
I really did not follow the answer to my question no 3. can I use that interest money earned in India.........Principal amount. You have answered ...(.you would have paid Tax in uk ......). What I meant was if I earned say £3800 per year in India on £40 000 and spent that money on others, kept doing it every year for 3-4 years and then brought back only £40 000 here as my principal money, then will there be any tax on the principal money .
Customer reply replied 1 year ago.
I'll rate your answer soon.you have been very helpful.thanks.
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Vasanti, thank you for your reply..
I thought I had answered it..
As far as interest goes, you would pay UK tax on the interest received every year whether you remit it to the UK or leave it in India to be spent on yourself or others.
As far as the principal is concerned, it would not attract any tax in the UK when brought into this country.
I hope this is helpful.
Customer reply replied 1 year ago.
Your sentence....ther will be no further tax to pay on remittance of principal or interest received. Which interest .interest received here or there.can you give me an example on £40000 (in Indian rupees 40 lacks or 400 000). Interest rate is 9.8 percent.will I be able to ask any other related question in next few days after rating your answer today?
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Vasanti, thank you for your reply.
We have been referring to interest earned on a glaobal basis. If you leave the inherited funds in India and earn interest at 9.8% then that interest would be taxed in the UK as and when received, because you are taxed on worldwide income.
If you decide to remit that interest to the UK, there is no further tax as it now becomes remittance of taxed income.
Once the funds are in the UK, any further interest earned on those funds would be taxed as normal.
Interest earned attracts tax whether in India or in the UK.
I hope this is helpful.
You can also related question on this thread.
Customer reply replied 1 year ago.
The reason I asked this because in India NRE account is tax free as Indian goverment is encouraging NRIs to invest money in India.that way I'm better off keeping my interest there or spending it for some years. After some time I can bring only principal money keep it here and then pay tax on any interest earned.sorry for repeating few things.im bit nervous about the whole thing.thanks for being very patient.
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Vasanti, thank you for your reply.
Normally, you would pay witholding tax in India on interest earned.
As UK National and being UK resident, you are taxed on your income arising in the UK and overseas.
Under Double Taxation Treaty you would be able to claim foreign tax credit relief against the tax suffered on that income in India. As it happens, Indian Government lets you earn interest free of Indian Tax deduction if you maintain a NRE account. I am aware of this as I have clients with funds in India.
Whether that interest gets taxed in India or not, it would be taxed in the UK irrespective. If tax was to be deducted at source in India, then Foreign tax credit relief will be claimable against tax suffered)
I hope this is clearer and helpful.
Customer reply replied 1 year ago.
As a lay person it was difficult to understand few things first for example, I was unable to comprehend that uk could deduct interest earned in India irrespective of funds are there or here in uk. But I feel I would still be making good money there even after paying interest to uk authorities at the source .am I correct? I want your advice on how I'm better off bringing money straightaway here or keeping it in India for some time as I might not get that interest rate here.im very happy with your answers so far and hopefully this is the last one on this topic. Another point if I leave this money in NRO account in India they deduct 30%tax.when i bring this money here still there be tax here for me.may be you made it clear but please tell me in lay persons language.am I better off if I keep this money in India in NRO or NRE for tax purposes there and here.at the moment it is NRO account and soon will be transferred into NRE.
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Vasanti, thank you for your reply.
At present the interest rates in India are very good compared to UK even allowing for currency fluctuation and tax you have to pay on this interest. Unless you have an immediate need for those in the UK, I would be inclined to leave them in India for reasons aforementioned..e.g. using interest earned for local expenditure and/or gifting it to needy ones.
If you leave funds in NRO a/c with 30% withholding tax, you would not pay any more tax in the UK as tax rate here is 20% (assuming you are a basic rate tax payer). You would be able to claim foreign tax credit relief upto 20%.
If the funds can be kept in NRE a/c then you will not pay any tax in India but just 20% here.
Finally, if you wish to retain the funds in India for any length of time, you are better off having an NRE a/c for reasons already mentioned.
I hope this is helpful.
Customer reply replied 1 year ago.
That's what I was planning.using interest earned there on NRE FD account for. local expenditure for few years and when needed bring only principal money to UK. 1. though UK would not tax on this principal amount brought here , is it possible , In your experience , they would ask. me unnecessary questions why I left interestT in India and find a way taxing me on this principal amount. 2.i am also thinking this earned interest from NRE account to leave in another NRE account just to save confusion for me and UK authorities between principal money and interest money .when I wish I could bring this interest from the 2 nd NRE account here and pay income tax here.Is it a good idea or I can just keep it in one NRE account (principal and interest) and proper paper work can prove which is principal and so on. Thank you very much indeed. Is that right that after rating you it has to be new topic to ask and not this one.
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Vasanti, thank you for your reply and for your good words.
You are making matters complex for yourself.
There is no need to have more than one NRE a/c.
There will be no tax on principal amount brought back to the UK .. no unnecessary questions will be asked as you are transferring your own money from one account to another (it is you who is asking yourself un uncessary questions .. please stop worrying!!!)
Any new questions would have to be asked fresh.. I will be happy to assist you if your request for me in the body of the question.
I hope this is helpful.
If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.
Customer reply replied 1 year ago.
Sorry for extra trouble.you are dealing with a singe old age pentioner with very little confidence .am very very happy with your answers.definitely I have now 101% satisfaction. It's 7 stars rating from my side.
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
I thank you for accepting my answer.
Thank you for your good words.
Best wishes.
taxadvisor.uk, Chartered Certified Accountant replied 1 year ago.
Your reward of a generous bonus is greatly appreciated.
Best wishes...

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