Can we pay rent in India without tax penalties?

The Telegraph – 9 March 2016
Howard Bilton, chairman, The Sovereign Group

Q. My wife and I live in Mysore, India, and run a school as volunteers, without pay.

We rent a flat here and intend to keep it when we retire to England. We will return to Mysore during the winter months on a tourist or residents visa.

In order to pay rent on the flat we would like to make regular transfers from our UK account with Nationwide to HDFC, our bank in Mysore, HDFC.

We pay UK tax on our industrial and state pensions, which is our only source of income. I would expect to transfer £500 to India monthly, but would there be a tax problem with the Indian government? I do not want to be taxed twice.

We are both British and own our home in England. I am 78 and my wife is 72.

Terry Gibson

A. Howard Bilton, chairman, The Sovereign Group

There should be no tax issues on the transfer of your money into India. I am assuming you will not be tax resident there and therefore not subject to Indian tax except on income arising in India.

The source of the funds you wish to transfer are your pensions, which you say have already been taxed in the UK. Even if tax was theoretically payable on that income in India (which I do not believe it is) you will get relief against Indian tax for the tax already paid in the UK. This is because a tax treaty has been signed between India and the UK which is designed to eliminate double taxation on the same income.

You say that the purpose of transmitting funds into India is to pay the rent on your flat so I would have thought it was more efficient for you to transfer money direct from your UK account to your landlord in India. Why complicate matters by transferring it to yourself first and then transferring on to the Indian landlord?

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