Pension from abroad
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
29 March 2013
Request for an answer from the experts.
A female assessee(resident in current PY) has received pension worth Rs. 3.3 crores in lumpsum from Switzerland after the death of her husband. The amount was received directly in the Indian bank account from the pension institution. It was received after deducting tax at the rate of 8-10%.
Is the amount received in India be liable to Tax due to difference in tax rates??
Please advise.
A female assessee(resident in current PY) has received pension worth Rs. 3.3 crores in lumpsum from Switzerland after the death of her husband. The amount was received directly in the Indian bank account from the pension institution. It was received after deducting tax at the rate of 8-10%.
Is the amount received in India be liable to Tax due to difference in tax rates??
Please advise.
Querist : Anonymous
Querist :
Anonymous
(Querist)
30 March 2013
Please advise on the same
10 August 2024
When dealing with foreign pension received in India, several factors come into play regarding taxability and how to manage the difference in tax rates. Here’s a detailed breakdown of the situation:
### **1. Taxability of Foreign Pension:**
- **Taxability in India:** The lump sum pension received from abroad is generally taxable in India as per the provisions of the Income Tax Act, 1961. It is considered as income from other sources. You need to include the amount received in your total income while filing your return in India.
- **Tax Deducted at Source (TDS) Abroad:** The pension amount was taxed at source in Switzerland at a rate of 8-10%. This foreign tax credit is often available to mitigate the impact of double taxation.
### **2. Double Taxation Avoidance Agreement (DTAA):**
- **DTAA with Switzerland:** India and Switzerland have a Double Taxation Avoidance Agreement (DTAA). This agreement helps in preventing double taxation of the same income and provides for a credit for taxes paid abroad. You will need to refer to the DTAA provisions to determine if and how you can claim a tax credit for the tax paid in Switzerland.
- **Claiming Foreign Tax Credit:**
- **Eligibility:** You can claim a tax credit in India for the tax paid in Switzerland as per the DTAA provisions. This is done by filing the appropriate form and providing proof of tax payment abroad.
- **Procedure:** The foreign tax credit is claimed using Form 67 in India, which allows you to claim a credit for taxes paid abroad.
### **3. Tax Filing in India:**
- **Inclusion of Income:** The total pension received, including the lump sum amount of Rs. 3.3 crores, should be included in your total income while filing your income tax return in India.
- **Tax Calculation:** You will need to calculate the tax on this amount as per the Indian tax rates applicable to your total income.
- **Adjustment for Foreign Tax Credit:** After calculating the tax liability, adjust the tax credit for the amount already paid in Switzerland. This reduces your Indian tax liability by the amount of credit you are eligible for under the DTAA.
### **4. Practical Steps:**
1. **Include Foreign Pension:** Report the entire lump sum pension amount in your Indian tax return under the head "Income from Other Sources."
2. **Claim Foreign Tax Credit:**
- **Documentation:** Gather documents proving the tax paid in Switzerland.
- **File Form 67:** Submit Form 67 to claim a tax credit for the taxes paid abroad.
3. **Consult a Tax Professional:** Given the substantial amount involved and the complexity of international tax regulations, consulting with a tax advisor or consultant who has experience with international tax matters is advisable. They can help ensure compliance with all relevant tax laws and maximize the benefits of any available credits.
### **Summary:**
- **Tax Liability in India:** The entire amount received is subject to tax in India.
- **Foreign Tax Credit:** Claim a credit for taxes paid in Switzerland as per the DTAA provisions.
- **Consult a Tax Professional:** Given the complexity of handling foreign income and tax credits, professional advice is recommended.
This approach ensures that you are compliant with Indian tax laws while effectively managing the impact of the foreign taxes already paid.
### **1. Taxability of Foreign Pension:**
- **Taxability in India:** The lump sum pension received from abroad is generally taxable in India as per the provisions of the Income Tax Act, 1961. It is considered as income from other sources. You need to include the amount received in your total income while filing your return in India.
- **Tax Deducted at Source (TDS) Abroad:** The pension amount was taxed at source in Switzerland at a rate of 8-10%. This foreign tax credit is often available to mitigate the impact of double taxation.
### **2. Double Taxation Avoidance Agreement (DTAA):**
- **DTAA with Switzerland:** India and Switzerland have a Double Taxation Avoidance Agreement (DTAA). This agreement helps in preventing double taxation of the same income and provides for a credit for taxes paid abroad. You will need to refer to the DTAA provisions to determine if and how you can claim a tax credit for the tax paid in Switzerland.
- **Claiming Foreign Tax Credit:**
- **Eligibility:** You can claim a tax credit in India for the tax paid in Switzerland as per the DTAA provisions. This is done by filing the appropriate form and providing proof of tax payment abroad.
- **Procedure:** The foreign tax credit is claimed using Form 67 in India, which allows you to claim a credit for taxes paid abroad.
### **3. Tax Filing in India:**
- **Inclusion of Income:** The total pension received, including the lump sum amount of Rs. 3.3 crores, should be included in your total income while filing your income tax return in India.
- **Tax Calculation:** You will need to calculate the tax on this amount as per the Indian tax rates applicable to your total income.
- **Adjustment for Foreign Tax Credit:** After calculating the tax liability, adjust the tax credit for the amount already paid in Switzerland. This reduces your Indian tax liability by the amount of credit you are eligible for under the DTAA.
### **4. Practical Steps:**
1. **Include Foreign Pension:** Report the entire lump sum pension amount in your Indian tax return under the head "Income from Other Sources."
2. **Claim Foreign Tax Credit:**
- **Documentation:** Gather documents proving the tax paid in Switzerland.
- **File Form 67:** Submit Form 67 to claim a tax credit for the taxes paid abroad.
3. **Consult a Tax Professional:** Given the substantial amount involved and the complexity of international tax regulations, consulting with a tax advisor or consultant who has experience with international tax matters is advisable. They can help ensure compliance with all relevant tax laws and maximize the benefits of any available credits.
### **Summary:**
- **Tax Liability in India:** The entire amount received is subject to tax in India.
- **Foreign Tax Credit:** Claim a credit for taxes paid in Switzerland as per the DTAA provisions.
- **Consult a Tax Professional:** Given the complexity of handling foreign income and tax credits, professional advice is recommended.
This approach ensures that you are compliant with Indian tax laws while effectively managing the impact of the foreign taxes already paid.
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