This article explains what UK-based NRIs do with their India investments in the new non-dom tax changes.

📚 Table of Contents

☰

• What is the Change in Non-Dom Taxation in the UK?
• Can NRIs Already in the UK benefit from the Temporary Repatriation Facility (TRF)?
• What Other Benefits are there for NRIs apart from the TRF?
• What is the Impact on UK NRIs on Their Indian Income?
• Should NRIs Invest in Indian Markets After the Non-Dom Rule Change?

What is the Change in Non-Dom Taxation in the UK?

From 6th April 2025, the UK implemented a change to the “remittance-basis” tax rules that allowed non-domiciled (“non-dom”) UK taxpayers not to pay any taxes on their foreign income and gains (FIG) as long as that FIG did not enter the UK. This is a taxation change applicable to UK tax residents and is not related to UK citizenship.

Under the remittance basis, NRIs in the UK who weren’t deemed domicile could have avoided paying tax in the UK on their Indian capital gains from stocks, mutual funds, real estate sales, interest from NRE FDs, and rental income from Indian properties as long as they did not bring that amount into their UK bank account.

Under the changed laws, the remittance basis is abolished for foreign income and gains arising on or after 6 April 2025. UK tax residents are now generally taxed on their worldwide income and gains on an arising basis, regardless of remittance. There are some complex rules and conditions around the taxation rule change that we have simplified in the form below:

You can also listen to this AI-generated podcast that talks you through the concept:

Can NRIs Already in the UK benefit from the Temporary Repatriation Facility (TRF)?

Temporary Repatriation Facility (TRF) is offered to UK-based NRIs and taxpayers who had earlier used remittance-based taxation. Under the TRF, you can remit into the UK any previously untaxed (and therefore unremitted) FIG occurring before 6th April 2025 by paying a reduced tax rate:

What Other Benefits are there for NRIs apart from the TRF?

If you were not eligible for remittance-based taxation before 6th April 2025, the TRF does not apply. Instead, you can see if one of the following is applicable:

What is the Impact on UK NRIs on Their Indian Income?

We have a simple calculator that you can use to estimate the extra tax you need to pay on your Indian income due to the non-dom rule change:

Should NRIs Invest in Indian Markets After the Non-Dom Rule Change?

There are substantial counter-arguments here starting with the fact that the tax to be paid, for example, if you invest outside the UK, is not higher than if you invest inside the UK. Therefore, it all comes down to the returns you will get.

There is ample evidence that long-term wealth creation potential is better in India for all asset classes:

The case for equity investments in India using mutual funds is extremely straight-forward as we can see below for SIP investments:

Here is the same view for lump sum investments:

The Indian real estate market is also seeing a boom in the major Top 7 or Top 10 cities with rupee depreciation making payments for under-construction properties becoming cheaper with time. Here is an example for NRIs looking to invest in real estate in India:

If you are funding current expenses for parents in India, you can get both an inflation-indexed income stream and capital appreciation by investing in dividend-paying stocks in India as we show in the video below:

The tax you will pay in the new non-dom regime will be calculated like this for an example of ₹50 lakhs capital gains from an Indian equity mutual fund investment with a foreign tax credit (FTC) available due to DTAA.

Learn more about the DTAA here:

Note: This 24% rate in the above example is the maximum tax to be paid. Benefits like TRF or the new 4-year FIG regime have the potential to reduce the taxes to be paid in the UK substantially when applicable.

To get started with mutual fund investing in India under the new UK tax regime:

Book a consultation