What does the India-UK tax treaty mean for Indian freelancers and agencies?

The India-UK tax treaty is the Convention signed on 25 January 1993, as amended by a Protocol signed on 30 October 2012.¹ HMRC lists the Protocol as in force from 27 December 2013, and India applies it from that date.²

This guide quotes the consolidated text published by HMRC on gov.uk and notes the changes made by the Multilateral Instrument (MLI).¹³ Treaty articles set the outer limits; whether a UK payer withholds anything in practice depends on UK law and on what the payment is for. Confirm your position with a chartered accountant (CA) where the amounts are material.

What is the India-UK tax treaty for Indian freelancers and agencies?

The India-UK tax treaty is the 1993 Convention between India and the UK, as amended by the 2012 Protocol and modified by the MLI, which decides when the UK may tax fees an Indian resident earns from a UK client.¹³ It applies when an Indian writer, designer, developer, consultant, marketer or agency earns fees from a client resident in the UK.¹

• Signed: 25 January 1993.¹
• Protocol: signed 30 October 2012, in force from 27 December 2013.¹²
• MLI: India applies the MLI changes from 1 April 2020, according to HMRC.²

The articles that matter most are 5, 7, 13, 15 and 24.¹

Who does the India-UK tax treaty apply to?

The India-UK tax treaty applies to Indian residents earning from UK-resident clients, with different articles for individuals, partnerships, companies and licensors.¹

Which row applies depends on what the payment is for and where the work was done.

How do you apply the India-UK tax treaty to a fee from a UK client?

You apply the India-UK tax treaty to a fee from a UK client by classifying the fee, checking presence in the UK, and then claiming credit in India for any UK tax paid.¹⁴

1. Classify the fee: professional services (Article 15), business profits (Article 7), or a royalty or fee for technical services (Article 13).¹
2. Count days in the UK: Article 3 defines the fiscal year, for UK tax, as the year beginning 6 April and ending 5 April; check for a fixed base too.¹
3. Check the PE tests: for a business, the Article 5 tests on fixed places, service PEs and dependent agents.¹
4. Apply the Article 13 cap: for royalties or fees for technical services, UK tax may not exceed 15% or 10% of the gross amount.¹
5. Claim credit in India under rule 76 of the Income-tax Rules, 2026, in Form No. 44.⁴

See foreign tax credit for the filing steps.

When can the UK tax an Indian freelancer under Article 15?

The UK can tax an Indian freelancer under Article 15 (Independent personal services) only if the services are performed in the UK and the individual is present there for 90 days in the fiscal year or has a fixed base there.¹ Article 15 covers income derived by an individual, whether in his own capacity or as a member of a partnership, from professional services or other independent activities of a similar character.¹ That income "may be taxed" in the country of residence, India, and may also be taxed in the UK only if the services are performed in the UK and:¹

1. the individual is present in the UK for a period or periods aggregating 90 days in the relevant fiscal year;¹ or
2. the individual, or the partnership, has a fixed base regularly available in the UK for performing the activities.¹

• Attributable income: in each case only the income attributable to those services may be taxed in the UK.¹
• Partners: Article 15(2) treats a partner as present in the other country on days when another partner is present there performing services.¹
• Professional services: Article 15(3) says "professional services" includes independent scientific, literary, artistic, educational or teaching activities, and the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.¹

When does an Indian business have a permanent establishment in the UK?

An Indian business has a permanent establishment (PE) in the UK when it has "a fixed place of business through which the business of an enterprise is wholly or partly carried on" there, under Article 5 of the India-UK treaty, which lists examples including a place of management, a branch and an office.¹

Article 7 (Business profits) covers an enterprise such as a private limited company or LLP. Its profits are "taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein", and if it does, only so much of the profits as is directly or indirectly attributable to that permanent establishment may be taxed there.¹

For service exporters, Article 5(2)(k) adds the furnishing of services, including managerial services, other than those taxable under Article 13, within a country through employees or other personnel, but only if:¹

• 90-day test: activities of that nature continue in that country for a period or periods aggregating more than 90 days within any twelve-month period;¹ or
• 30-day test: services are performed in that country for an associated enterprise within the meaning of Article 10(1) and continue for a period or periods aggregating more than 30 days within any twelve-month period.¹

Article 5(4) treats a dependent agent as a PE if, among other things, he habitually exercises an authority to negotiate and enter into contracts for the enterprise or habitually secures orders wholly or almost wholly for it.¹ Under the MLI, Article 13 of the MLI modifies the activity exemptions in Article 5(3) where the same or a closely related enterprise carries on business at the same or another place in the country.³ The PE guide explains these tests.

What rates apply under Article 13 of the India-UK treaty?

Article 13(2) of the India-UK treaty caps the UK tax on royalties and fees for technical services at 15% of the gross amount, or 10% for equipment-related payments, where the beneficial owner is a resident of India.¹

The Convention has had effect in India from 1 January 1994 and in the UK from the 1994 tax years, so the "subsequent years" rate of 15% is the one in the treaty today.¹ Under Article 13(6), the caps do not apply where the right, property or contract is effectively connected with a UK PE or fixed base; Article 7 or 15 applies instead.¹

What are "fees for technical services" under the India-UK treaty?

"Fees for technical services" under the India-UK treaty means payments for technical or consultancy services, including the provision of services of technical or other personnel, which are ancillary and subsidiary to a royalty, or which "make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design" (Article 13(4)).¹

• Exclusions: Article 13(5) excludes amounts paid for teaching in or by educational institutions, for services for the private use of the individual paying, and "to an employee of the person making the payments or to any individual or partnership for professional services as defined Article 15".¹
• Royalties: royalties under Article 13(3)(a) include payments for the use of, or the right to use, a copyright of a literary, artistic or scientific work, a patent, trademark, design or model, plan, secret formula or process.¹

What happens if UK tax is paid on an Indian exporter's fee?

If UK tax is paid on an Indian exporter's fee, Article 24(2) of the India-UK treaty requires India to allow it as a credit against Indian tax, limited to the proportion of Indian tax which that income bears to the entire income chargeable to Indian tax.¹

• Rule 76: applies this in India; the credit is the lower of the Indian tax and the UK tax on that income.⁴
• Excess UK tax: any UK tax above the treaty rate is ignored.⁴
• Form: the claim is made in Form No. 44.⁴

Keep the UK tax deduction records for the claim.

How is UK tax and Indian credit calculated under the India-UK treaty?

UK tax on a royalty under the India-UK treaty is capped at 15% of the gross amount, and the Indian credit is the lower of that UK tax and the Indian tax on the same income.¹⁴

Say a Jaipur e-learning studio licenses a recorded course to a UK training company for £10,000. The payment is for the right to use a copyright, a royalty under Article 13(3)(a), so the UK tax on it may not exceed 15% of the gross amount if the studio is the beneficial owner and a resident of India.¹

1. UK cap: 15% of £10,000 is £1,500.¹
2. Indian tax on that income: worked out under Indian tax rules for the studio.⁴
3. Credit: the lower of the UK tax paid within the cap and the Indian tax on that income.⁴
4. Excess: any UK tax above £1,500 is above the treaty rate and is ignored for credit.⁴

Work out the Indian tax figure with a chartered accountant, because it depends on the studio's total income.

What anti-abuse rules apply under the India-UK treaty?

The India-UK treaty denies benefits where obtaining them was a main purpose of an arrangement. Article 28C of the 2013 text did this, and the gov.uk synthesised text records that MLI Article 7, a principal purposes test, replaces Article 28C.¹³

• Effective date: HMRC lists India as applying the MLI changes from 1 April 2020.²
• Differing views: the synthesised text notes that the UK and India take different views on whether MLI Article 7 supersedes the main purpose clauses in Articles 11, 12 and 13.³

These clauses matter most for structures that route income through another country; have any such structure reviewed by an adviser.

What are the common mistakes with the India-UK tax treaty?

The common mistakes with the India-UK tax treaty are counting days against the wrong year, treating every fee as a technical fee, and ignoring the MLI text.¹³

• Wrong year: the 90-day test under Article 15 uses the UK fiscal year from 6 April to 5 April.¹
• Treating all fees as technical fees: Article 13(5)(e) excludes professional services as defined in Article 15.¹
• Forgetting partners: a partner is treated as present on days another partner is in the UK.¹
• Ignoring the MLI: read the gov.uk synthesised text with the 1993 Convention.³
• Claiming excess UK tax: UK tax above the treaty rate is ignored for credit in India.⁴

Treaty outcomes depend on the contract and the facts, so confirm material amounts with a chartered accountant.