Is foreign pension taxable in India as income

#1 Jan 23rd, 2017, 13:27
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  • salima is offline
#1
i have lived in india since 2003. i do not work here but i had determined that i would not have to pay income tax to india on my pension from usa. actually it doesnt matter because i would never have enough pension to qualify for the honor of paying income tax in india. but something has come up to make me want to check and be sure i was correct in my reasoning.

i have been looking over the tax treaty between india and usa.
article 19 refers to government service employees, and since i worked at private companies only, i would use article 20 for my reference.

article 20 (private pensions, annuities, alimony and child support)

1. Any pension, other than a pension referred to in Article 19 (Remuneration and Pensions in
Respect of Government Service), or any annuity derived by a resident of a Contracting State from sources within the other Contracting State may be taxed only in the first-mentioned Contracting State.

2. Notwithstanding paragraph 1, and subject to the provisions of Article 19 (Remuneration and
Pensions in Respect of Government Service), social security benefits and other public pensions paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.

the above are the paragraphs that refer to me. my pension is not exactly from the companies where i worked, but from the government. it is social security benefits.

the way i interpret the section in bold type is:
my pension is paid by the contracting state first mentioned (usa) to a resident (which is me) of the other contracting state (which is india). it is taxable only in the first mentioned state (which is usa).

these things are always extremely difficult to understand due to the the over-engineered way they are written in the attempt to avoid any misunderstanding.

from the treasury departments technical explanation which i have in pdf form:
section explaining article 20:

Paragraph 1 provides that private pensions and any annuities derived by a resident of a Contracting State from sources within the other Contracting State are taxable only in the State of residence of the recipient.

Paragraph 2 provides a different rule for social security benefits and other public
pensions (other than those which are dealt within Article 19) paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States. Such payments aretaxable only in the Contracting State that pays them.

i think the last paragraph verifies the conclusion i had come to, but i wanted to check with anyone who has any experience in the subject.
#2 Jan 23rd, 2017, 13:40
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  • dillichaat is offline
#2
Your reasoning seems correct and reflects what the treaty says. Obviously contingent on the qualification of your income as 'social security benefits or other public pension' and there you don't seem totally sure.
"It is preferable to have a criminal for a servant rather than a fool because a criminal's actions are predictable and you can protect yourself against them, whereas there is no telling what a fool's next move will be.
#3 Jan 23rd, 2017, 14:04
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  • salima is offline
#3
Quote:
Originally Posted by dillichaat View Post Your reasoning seems correct and reflects what the treaty says. Obviously contingent on the qualification of your income as 'social security benefits or other public pension' and there you don't seem totally sure.
sorry, i am sure-my pension is social security benefits. i was just posting both paragraphs to show there is a difference in the rules and hoping that i understood what i read!
Last edited by salima; Jan 23rd, 2017 at 14:04.. Reason: typo
#4 Jan 23rd, 2017, 14:22
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  • edwardseco is offline
#4
Its a lot better tax exposure in the US than India so its a good thing for that tax treaty..
#5 Jan 23rd, 2017, 14:31
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  • dillichaat is offline
#5
....I'd kill for India's income tax rate. Over here my marginal rate is 50%, average rate 43%. That's AFTER my social security contributions and before paying VAT at 6% on essential food and 21.5% on everything else.
#6 Jan 23rd, 2017, 15:58
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  • Nick-H is offline
#6
Salima, congratulations and hope you're right!
Indian income tax liability currently starts at 2.5 or 3 lakh Rs. Amazed if you manage to live on less... Even though I know that millions of Indians do.

I guess you must have simplified and cut back your lifestyle and its cost.

I don't think there is much luxury in my life, but yes, I look around me and see many things that could be lived without. Starting with the car....
~
Life gets aadhar every day.
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