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Pension dtaa

shalini (CA) (525 Points)

01 January 2017

Is pension received from US by Indian ordinary resident (US citizen) taxable in India? Few articles say that Indian ROR is liable to be taxed on global income so pension received from US is also taxable and foreign tax credit can be availed but some articles say that according to article 20 (US-India DTAA treaty) US pension is not taxable for ROR. Please guide me

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7 Replies

Abhinav (CA) (397 Points)
Replied 02 January 2017

The frame for reference for your query are Article 19 and 20 of India USA DTAA. If it is public pension, Article 19 shall apply, and if private, Article 20 will apply.

A very important fact you have mentioned is that the person is a USC. As per my reading and interpretation of both Articles of the DTAA, irrespective of the type of pension, if recepient is a USC, then pension will be taxable ONLY in USA and not in India.

In such a case, it is advisable that person discloses this income as exempt income in Indian tax return and also disclose foreign pension assets in Schedule FA in compliance to the Black Money Act.

Thanks!

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160322 Points)
Replied 02 January 2017

@ Mr. Abhinav Gulechha:

Request you to clarify my doubt in above case:

As the assessee is ROR (though USC) for the particular ass yr. Isn't he liable to declare the pension income as taxable as per Indian IT act, and claim deduction of taxes paid in US? (of course, TRC would be required). Which method would be more beneficial, exempted one as above or tax credit?

thanks & regards.

Dhirajlal Rambhia

shalini (CA) (525 Points)
Replied 02 January 2017

I also have the same doubt. As he is ROR he should pay taxes on global income.

As tax deducted in US is less than 10% in his case and he is liable to pay 30% in India so beneficial method would be exemped one but I am not sure whether it can be claimed as exempt income.

shalini (CA) (525 Points)
Replied 07 January 2017

I was going through US-India treaty and got confused again. Doesn't these lines (2b) means that if Indian ordinary resident(even though US citizen) is getting govt. pension from US it will be taxable in India only. I think that in my case contracting state is US (pension payer) and other contracting state is India.

2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to that State or sub-division or authority shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.

Legistify (33 Points)
Replied 07 January 2017

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160322 Points)
Replied 07 January 2017

.............the individual is a resident of, and a national of, that State."

I think, You are missing the words.....AND A NATIONAL OF.........

Secondly, the assessee is ROR only as per IT act, not otherwise.

Legistify (33 Points)
Replied 11 January 2017

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At Legisitfy, we want to make legal easy, fast and simple and most of all approachable by making it available to more people than ever before.

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