Interest on Fixed Deposits in India is taxable in UK if not brought to UK?

[mehul]

Hi,

My wife and I have some fixed deposits (FDs) and pension policies in India. My wife is a homemaker (no earning) and I am a working professional (40% tax bracket). We both are UK Citizen and UK resident.

The question is - The fixed deposits give us about 7% interest in Indian Non Resident NRE account (which is tax-exempted account as per Govt of India). Also We DO NOT bring interest monies to UK. These monies stays in this NRE account in India and we reinvest them in to recurring FDs every 3 years.

It was my understanding that since we are not bringing INTEREST monies into UK, it is not tax liable in UK and I do not have to declare them as earnings (since they are not coming to UK). Further since Indian government has tax exempted this interest earning of NRE account (much like ISA in UK), it is not tax liable in UK EVEN IF I try to bring them in UK.

Is my understanding correct or flawed? Any advise would be much appreciated.

Thanks
Mehul

[pawncob]

As you're UK resident for tax purposes, you're taxed on your worldwide income. The FDs might be tax free in India, but they're still taxable in the UK.