If you're an Indian Resident or an NRI wondering whether your UK ISA investments are taxable in India, you're not alone. This comprehensive and SEO-optimized guide will walk you through everything you need to know about the taxation of ISAs in India — especially under the latest 2025 capital gains tax rules.

What is an ISA (Individual Savings Account)?

An Individual Savings Account (ISA) is a popular UK-based investment account that allows residents of the United Kingdom to save or invest without paying tax on interest, dividends, or capital gains.

There are four main types of ISAs:

• Cash ISA – Earn tax-free interest.
• Stocks and Shares ISA – Invest in equities and funds; no tax on dividends or gains.
• Innovative Finance ISA – Peer-to-peer lending.
• Lifetime ISA – Long-term savings for first home or retirement.

Does India Tax ISA Investments?

Yes, India does tax ISA investments, if you are a Resident and Ordinarily Resident (ROR) in India under the Indian Income Tax Act.

ISAs are tax-free only in the UK. The tax-free benefit is not recognized by Indian tax laws.

So, if you're an NRI who has returned to India or someone holding ROR status, your ISA income will be taxed in India as follows:

Taxability of UK ISA in India (for ROR Individuals)

Taxability of Capital Gains from Stocks & Shares ISAs in India

If you're investing in equities or mutual funds via a Stocks & Shares ISA as part of your NRI investment in India, the capital gains arising from sales of such assets are taxable in India if you are a ROR individual.

Note: NRIs and RNORs are taxed only on income received or accrued in India. ISA income is not taxed unless you become ROR.

Capital Gains Taxation in India (Effective FY 2025-26)

From the assessment year 2025-26 onwards, the Indian Government has introduced a streamlined capital gains tax regime. Here’s how it impacts your ISA holdings:

Capital Gains Holding Period Rules (from FY 2025-26)

There will now be only two holding periods to determine capital gains:

Revised Capital Gains Tax Rates (2025 Onwards)

Long-Term Capital Gains (LTCG)

• Tax Rate: Increased to 12.5% on specified assets.
• Exemption Limit: Hiked from ₹1 lakh to ₹1.25 lakh per year (on total LTCG).

Short-Term Capital Gains (STCG)

• Tax Rate: 20% for certain specified assets.
• Other STCG: Taxed at your applicable income tax slab rate.

How Are Dividends from ISAs Taxed in India?

If your ISA pays dividends (such as from UK stocks or mutual funds held within the ISA), those dividends are taxable in India if you are a ROR.

• Taxed under "Income from Other Sources".
• Tax rate: As per your applicable slab rate.

Does Double Taxation Avoidance Agreement (DTAA) Apply?

Yes. India and the UK have a DTAA between India and UK. Under this agreement, you can claim credit in India for any tax paid in the UK on your ISA income (though most ISAs are tax-free in the UK).

Form 67 must be filed to claim foreign tax credit.

What if I Repatriate ISA Funds to India?

Bringing ISA funds to India through official banking channels (via NRO/NRE accounts) is not taxable per se. However, the income earned from ISA investments will be taxed in India if you're ROR.

Tax Planning Tips for NRI & Returning Indians with ISAs

• Check your Residential Status every year.
• If you're becoming ROR, consider withdrawing or restructuring ISA investments.
• Report ISA income in your ITR under foreign assets.
• Use Form 67 to claim any available tax credit.
• Consider getting a CA certificate (Form 15CA/CB) when repatriating large funds.

Final Word: Are UK ISAs Tax-Free in India?

No, UK ISAs are NOT tax-free in India if you are ROR. ISA interest, dividends, and capital gains must be disclosed in your Indian tax returns.

With the updated 2025 tax regime, ISA income will attract capital gains tax as per the new holding periods and tax slabs, making it crucial to restructure or exit such accounts upon becoming ROR.

For detailed NRI tax planning and personalized advice on managing overseas investments from India, reach out to us.