UK Taxes on Indian Property: What NRIs in Britain Owe Both Countries

Our guide to US taxes on Indian property opens by pointing out that a sale in India is also a tax event at home. That is just as true in Britain, but the arithmetic lands very differently, and the difference is expensive.

Britain is the harshest of the five corridors we cover. For comparison, Canada taxes only half your gain, Australia depends on your marginal rate, and the UAE imposes no second tax at all.

HMRC’s position is simple: if you are UK resident, you will normally pay tax on your foreign income. Your flat in Ahmedabad is not outside the system because it is abroad, because the rent never leaves India, or because you already paid tax in Mumbai.

The treaty does not stop both countries taxing you

The India UK convention handles gains the same blunt way the American one does. The consolidated 1993 convention as amended in 2013, published by HMRC, sets it out at Article 14 (Capital gains) in a single sentence: except for air transport and shipping, “each Contracting State may tax capital gains in accordance with the provisions of its domestic law.”

Note the article number. The equivalent provision in the US treaty is Article 13, so if you have read our American guide, do not carry the numbering across.

Immovable property is dealt with at Article 6, and relief lives in Article 24 (Elimination of double taxation), which says Indian tax “shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains.”

Two words in that sentence decide almost everything below: tax payable. Credit is given for tax you actually pay in India, not for tax you were charged before an exemption removed it.

Why you will usually still owe HMRC

This is the part that catches UK-based sellers, and it is where Britain differs from America. Credit relief is capped at the UK tax on that gain, and UK capital gains tax currently runs at 24% for a higher-rate taxpayer, with an annual exempt amount of just £3,000. India’s long-term rate is 12.5% plus surcharge and cess, landing near 15%.

The UK rate is the higher one, so the Indian tax rarely clears the UK bill. You pay the difference here.

Take the same flat used in our American guide: bought in 2015 for ₹40,00,000, sold in 2026 for ₹1,20,00,000. Illustrative rates of ₹100 to the pound at purchase and ₹115 at sale.

Illustrative worked example, August 2026, assuming a higher-rate taxpayer. Rates, allowances and exchange rates change; confirm your own position with an adviser.

Roughly two thirds of your UK bill is covered and you settle the rest in Britain. Budget for it, because nothing in the Indian process warns you it is coming, and the Indian TDS machinery gives no hint that another tax authority is waiting.

The Section 54 trap bites harder here

The trap we set out in the American guide applies in Britain too, for exactly the reason flagged above.

Section 54 lets you reinvest the gain in another Indian residential property and pay no Indian tax. But Article 24 credits Indian tax payable, so if nothing is payable, nothing is creditable. The UK taxes the full gain with no relief at all.

In the example above, claiming Section 54 turns a £4,776 top-up into the entire £14,723 falling due in Britain. The relief costs you £9,948 of lost credit, and it locks your sale proceeds into Indian property for up to three years to do it.

Unlike the American case, where the credit often covers the whole US bill and Section 54 is close to a wash, in Britain you were always going to pay HMRC something. The exemption simply increases how much.

What changed on 6 April 2025

If you have read anything about keeping Indian money in India to stay outside UK tax, check when it was written. That planning largely died in 2025.

Before 6 April 2025, a UK resident whose permanent home was abroad could often use the remittance basis and leave foreign income and gains untaxed here unless the money was brought into the country. HMRC now states plainly that this applied before 6 April 2025, and the regime became residence-based from that date, with a four-year foreign income and gains regime for those new to UK residence.

For most established British NRIs, the practical position is now the straightforward one: you are taxed on worldwide income and gains, whether or not the money ever reaches a UK bank. Where the rent or the sale proceeds sit, an NRO account or otherwise, no longer changes your UK liability, though it still matters a great deal for Indian repatriation rules covered in our guide on NRE, NRO and FCNR accounts.

Inheritance tax, the exposure nobody mentions

This is the largest number on this page and the one least discussed.

India has charged no inheritance or estate tax since estate duty was abolished in 1985, which is why our guide on selling inherited property can say inheriting costs nothing in tax. That is an Indian answer. Britain has its own.

From 6 April 2025 the old deemed domicile rules were replaced by a long-term UK residence test. Broadly, once you have been UK resident for at least 10 of the previous 20 tax years, inheritance tax applies to your assets worldwide, your Indian property included, at 40% above the available thresholds. Leaving Britain does not end it immediately either: a tail of between three and ten years applies depending on how long you were resident.

So a family flat that passes to your children entirely free of Indian tax can still generate a 40% British charge on its value. For a property worth ₹2 crore that is a seven-figure rupee exposure created by a country the property has never been in. If you have been in the UK a decade or more and own Indian property, this deserves proper advice, and it deserves it well before it becomes relevant.

Rent from an Indian property

Rental income follows the same pattern as a sale. It is taxable in the UK regardless of where it is paid or held, Indian tax paid on it is creditable, and the UK computation follows UK rules on allowable expenses rather than Indian ones. Note that UK relief for finance costs on residential property works differently from the deduction an Indian return allows, so the taxable profit each country sees will not match. Our rental yield calculator sizes the Indian side; the British side needs separate treatment.

Reporting and timing

Reporting runs through the SA106 foreign pages of your Self Assessment return, which is where you declare foreign income and gains and claim Foreign Tax Credit Relief. HMRC also warns that you may not recover the full amount of foreign tax paid where the UK rate is lower or the treaty specifies less.

Then there is the calendar. India runs 1 April to 31 March; the UK runs 6 April to 5 April. Those five days matter more than they look: a sale completed in early April can fall into different tax years in each country, which changes when the Indian tax is paid and when the credit can be claimed. If your completion date is anywhere near the boundary, have the timing checked first.

A workable sequence

1. Model both bills before you agree the sale. The UK top-up is the number people miss, and it is not small.
2. Decide on Section 54 with Article 24 in front of you, not on Indian advice alone.
3. Apply for a lower deduction certificate so Indian TDS tracks your real liability rather than your sale price. See our TDS guide.
4. Keep exchange rate evidence for both the purchase and the sale. HMRC computes in sterling.
5. Check your completion date against both tax years.
6. Review your inheritance tax position separately. It is a different question from the sale and it does not go away by selling.

Once the tax is settled on both sides, moving the money is its own process, covered in repatriating property sale proceeds.

This guide explains how two tax systems interact, using HMRC guidance and the published India UK convention current at August 2026. It is not tax advice. UK residence, domicile and inheritance tax rules changed substantially in 2025 and continue to be refined, so confirm your position with a chartered accountant in India and a UK adviser experienced in cross-border property before you act.