44. Pensions received from abroad by pensioners residing in India - Taxability under clause (iii) of sub-section (1)
Circular No. 4 was issued by the Central Board of Direct Taxes on 20 February 1969. Its subject is 44. Pensions received from abroad by pensioners residing in India - Taxability under clause (iii) of sub-section (1).
Sets out when a foreign pension received by a pensioner living in India is taxable here. Under section 9(1)(iii) a pension accruing abroad is taxable in India only if it is earned in India, so a pension for past services rendered in a foreign country accrues abroad and is not taxable on accrual. It is not taxable on receipt either, if it is first drawn and received abroad and only then remitted or brought to India. It becomes taxable on receipt only where, under a definite agreement with the employer or former employer, the pension is received directly by the pensioner in India. Even a pension earned and received abroad is chargeable if the pensioner is resident and ordinarily resident, and not if he is non-resident or resident but not ordinarily resident; and the circular notes that ordinarily resident status is not acquired unless the person has been resident in India in at least nine of the preceding ten years.
The taxability of pensions received from abroad by pensioners settled in India needed to be stated, and the Board set out the position under section 9(1)(iii).
| Under the 1961 Act | Now |
|---|---|
| s.9 | s.9 |
44. Pensions received from abroad by pensioners residing in India - Taxability under clause (iii) of sub-section (1)
1. Under section 9(1)(iii ), pension accruing abroad is taxable in India only if it is earned in India. Pensions received in India from abroad by pensioners residing in this country, for past services rendered in the foreign countries, will be income accruing to the pensioners abroad, and will not, therefore, be liable to tax in India on the basis of accrual. These pensions will also not be liable to tax in India on receipt basis, if they are drawn and received abroad in the first instance, and thereafter remitted or brought to India.
2. It is only in cases where in pursuance of a definite agreement with the employer or former employer, the pension is received directly by the pensioner in India that the pension would become taxable in India on receipt basis.
3. While the pension earned and received abroad will not be chargeable to tax in India if the residential status of the pensioner is either "non-resident" or "resident but not ordinarily resident", it will be so chargeable if the residential status is "resident and ordinarily resident". The aforesaid status of "ordinarily resident" cannot, however, be acquired by a person unless he has been resident in India in at least nine out of the preceding ten years.
Circular : No. 4 [F. No. 73A/2/69-IT(A-II)], dated 20-2-1969.
In the return of a retired person settled in India with a foreign pension, and in a scrutiny asking why the pension was not offered to tax.
Source: the Income Tax Department’s own published text — its page for this instrument.