India-UK Free Trade Agreement

1. About:
   1. Signed on May 6, 2025.
   2. Aims to double bilateral trade from $60 billion to $120 billion by 2030.
   3. Covers goods, services, investments, technology, education, and more.
   4. Part of the India-UK Comprehensive Strategic Partnership.
       
2. Economic Benefits:
   1. Expected to boost two-way trade and investment.
   2. Will help create new jobs and support economic growth.
   3. UK businesses could gain £25 billion in extra trade every year.
   4. The UK's GDP may rise by £4.8 billion and wages by £2.2 billion annually.
   5. In FY25, total trade was $21.33 billion:
   6. India’s exports to UK: $12.9 billion (↑13.3%)
   7. Imports from UK: $8.4 billion (↓6.1%)
       
3. Key Areas of Cooperation: 
   1. Technology Security Initiative (TSI) for cooperation in:
      1. AI, Semiconductors, Telecom, Quantum tech, Biotech & HealthTech, Critical minerals, Advanced materials.
   2. Strategic Exports & Tech Cooperation Dialogue to improve high-tech trade.
   3. Infrastructure finance bridge to attract long-term UK capital to India.
   4. Cooperation in education, with UK universities planning campuses in India.
   5. People-to-people links to improve migration and work opportunities.
   6. New Cultural Cooperation Programme to boost ties in art, film, museums, sports.

Double Taxation Avoidance

1. About:
   1. India and the UK signed the DTAA in 1993.
   2. The main goal is to avoid double taxation on the same income.
   3. It helps people who earn money in both countries.
   4. Without this agreement, they would have to pay tax twice, once in India and once in the UK.
   5. People who are tax residents of India or the UK can use this agreement.
   6. A person is called a UK tax resident if they live in the UK for at least 182 days in a year.
   7. Such people can get tax relief or exemption under this agreement.

2. Significance:
   1. Fair Tax System: DTAA makes sure that people do not have to pay tax twice on the same income. This helps in making the tax system fair.
   2. Tax Benefits: People can get tax benefits like lower tax at the time of payment (TDS), full tax exemption, or a tax credit under this agreement.
   3. Less Tax Evasion: It helps stop tax evasion. NRIs (Non-Resident Indians) can pay fair and proper taxes on their income.
   4. More Jobs and Business: It supports people working in global companies. This helps create more job opportunities in India and abroad.
   5. Easy for Firms to Work: Indian and UK-based partnership firms can do business easily without worrying about paying tax in both countries.
   6. Law Support: The agreement is supported by Section 90A of India’s Income Tax Act, 1961. This helps people use the tax benefits under the DTAA.
   7. Help for Indian Students: Indian students in the UK can also get tax relief. For the first five years of their stay in the UK, they don’t have to pay tax on certain types of income. This is given under Article 21 of the DTAA.

Challenges

Way Forward

1. Delays in Finalising the FTA

Speed up negotiations through regular high-level meetings and deadlines.

2. Regulatory Barriers in Tech Trade

Strengthen the Strategic Exports & Tech Cooperation Dialogue to resolve licensing and compliance issues.

3. Different Standards and Norms (e.g., in AI, telecom)

Set up joint working groups to harmonise technical standards and testing norms.

4. Migration and Visa Issues

Simplify visa processes for students, professionals, and skilled workers from both countries.

5. Unequal Market Access for Businesses

Ensure mutual benefits in trade agreements; support MSMEs and start-ups with special trade provisions.

6. Tax Disputes Despite DTAA

Improve awareness of DTAA benefits and create a joint grievance redressal system.

7. Trust Deficit in Tech Sharing (Data, IP rights)

Build confidence through legal protections, joint research, and transparent sharing frameworks.

8. Limited Awareness Among Businesses

Launch awareness programs, trade fairs, and business exchange platforms to inform firms of new opportunities.

9. Underdeveloped Cultural and Educational Exchanges

Fast-track UK university campuses in India; promote student and faculty exchange programs.

10. Political Sensitivities (e.g., on terrorism or diaspora issues)

Maintain open diplomatic channels; build consensus through regular Foreign Secretary-level dialogue.

Technology Security Initiative (TSI)

About:

1. India and the UK are starting a new plan called the Technology Security Initiative (TSI).
2. This is to make their partnership stronger, especially in technology, security, and economy.

Key Points:

1. Technology is now very important for a country’s safety and growth. So, India and the UK want to work together more in this area.
2. TSI is part of the bigger India-UK Roadmap 2030. It will focus more on working together in new and important technologies.
3. It will support ongoing work in important technologies. It will expand old plans and also start new ways of working together.
4. The National Security Advisors (NSAs) of both countries will lead this.
5. They will decide which areas are most important and how to work together.
6. The NSAs will talk regularly. Every six months, the Deputy NSAs will check the progress.
7. A special team will be made with people from India’s Ministry of External Affairs and the UK government.
8. This team will help promote trade in new technologies.
9. They will also solve any problems related to rules or licenses.
    

Ensure IAS Mains Question:

Q. Discuss the recent developments in India–UK bilateral relations with reference to trade, technology, and taxation. How do initiatives like the Free Trade Agreement (FTA), Double Taxation Avoidance Agreement (DTAA), and Technology Security Initiative (TSI) contribute to strengthening this strategic partnership? (250 words)

Ensure IAS Prelim MCQ:

Q. Consider the following statements regarding the India–UK relations in recent years:

1. The Free Trade Agreement (FTA) between India and the UK aims to double bilateral trade by 2030.
    
2. The Technology Security Initiative (TSI) will be coordinated by the Ministry of Electronics and Information Technology.
    
3. Under the Double Taxation Avoidance Agreement (DTAA), Indian students in the UK are exempted from paying tax on certain income for the first five years.
    
4. The Strategic Exports and Technology Cooperation Dialogue focuses on improving cultural cooperation and museum exchanges.

Which of the statements given above is/are correct?

A. 1 and 3 only
B. 2 and 4 only
C. 1, 2 and 3 only
D. 1, 3 and 4 only

Answer: A

Explanation:

• Statement 1 is correct: The FTA aims to double trade from $60 billion to $120 billion by 2030.
   
• Statement 2 is not correct: The TSI is coordinated by the National Security Advisors (NSAs), not MeitY.
   
• Statement 3 is correct: DTAA provides Indian students in the UK tax relief under Article 21 for the first 5 years.
   
• Statement 4 is not correct: Strategic Exports and Technology Cooperation Dialogue focuses on tech trade, not cultural cooperation.