Foreign Death Pension

Here’s a clear breakdown of the tax treatment of Foreign Death Pension / Bereavement Claim Money received in India:

1. Is the Bereavement (Death) Claim Money taxable in India?

• Death claims or death benefits paid by a foreign pension plan to the nominee or legal heir are generally considered a capital receipt and not taxable as income under Indian Income Tax law.

• This amount is treated as a lump sum received on the death of the pension holder, not as pension income.

• Therefore, it is usually exempt from income tax in India.

2. Relevant Provisions / Sections:

• The amount received on death is generally regarded as exempt under Section 10(10D) of the Income Tax Act, which covers sums received under life insurance policies (including pensions and annuity contracts) on death of the policyholder.

• However, Section 10(10D) explicitly covers life insurance policies and pension schemes, so similar treatment is usually extended to foreign pension death claims based on their nature as death benefits.

3. Additional considerations:

• Since your mother was a Not Ordinarily Resident (NOR) and an OCI holder residing in India, and the amount was received by your father in India:

  • If the claim is a death benefit (lump sum), it is generally exempt.

  • If any portion is received as pension or periodic payments, that could be taxable as income.

• It’s advisable to check if there is a Double Taxation Avoidance Agreement (DTAA) between India and the UK regarding pensions and death benefits to avoid any tax conflict.

4. Tax Deduction at Source (TDS):

• Typically, no TDS is applicable on receipt of death benefits, since it is a capital receipt, not income.

Summary: