Indian Provident fund and UK taxation

Withdrawal from Indian Provident fund by a UK tax resident will be taxable in the UK.

Summary

In India, payment from provident fund is exempt income under section 10 of Indian Income Tax Act. Source: Taxation of Non- Residents – Revised (2021)

But in case an individual who is a UK resident withdraws it, he will need to pay UK income tax on it. Source: HMRC Employment Income Manual EIM74510

Main point to remember is value of Provident fund till 6 April 2017 will not be taxable, see EIM74510

Story

Many of us who left our lands and travelled to the UK in search of fame and fortune may be forced to withdraw funds from their Indian provident fund, it is better to know that it is taxed at the highest marginal rate in the UK.

Moral

Blessings of the Tax Gods every day you will learn something new!

Bonus

As per India UK DTAA Article 19 (2)- Any pension paid by Government of India to any individual shall be taxable only in India.

Government of India means Union, State or Municipal – see Article 3 (1) (k)

Source: UK India DTAA Agreement – Synthesized text

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