When is Pension Received From UK Taxable in India?
August 30, 2009 by taxworry · Leave a Comment
A senior citizen uncle is getting pension from UK in respect of contribution made by him during his employment there. He is resident in India & pension is received thru SBI. Till 2007-08, he had shown this as part of his income and return was filed with the SBI ward.Now, he saw article wherein it was stated that as per DTAA with UK, pensions are taxable only in that state. No tax has been deducted/paid in UK because of the amount is less than the personal allowance (i.e. exemption limit for old persons there).If this income is not taxable in India then his total income is below the taxable limit. Should he file his return? If yes, where will this amount be shown? Bharati Saxena . New Delhi
First of all , one should understand that in case of Resident of India, his global income is taxable . Section 5 of I.T. Act is about total income of a person taxable under I T Act. Read 5. (1) …the total income of any previous year of a person who is a resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year Therefore ,all income of Resident Indian , whether arise,accrue or deem to accrue or arise or received in India or deemed to be received in India , is taxable under the I T Act. In that sense, pension received by a resident Indian is taxable in India. How DTAA between India and Uk affects it? However, since DTAA supersedes I T Act, the Article 19 & Article 20 of the DTAA governs Pension and annuities. The said provisions are as under ARTICLE 19 – Government remuneration and pensions – 1. Remuneration, other than a pension, paid by the Government of a Contracting State to any individual who is a national of that State in respect of services rendered in the discharge of governmental functions in the other Contracting State shall be exempt from tax in that other Contracting State. 2. Any pension paid by the Government of a Contracting State to any individual in respect of services rendered to that Government shall be taxable only in that Contracting State. 3. The provisions of this Article shall not apply to remuneration or pensions in respect of services rendered in connection with any trade or business. ARTICLE 20 – Pensions and annuities – 1. Any pension, other than a pension referred to in Article 19(2) of this Convention, or annuity paid to a resident of a Contracting State shall be taxable only in that State. According , to aforesaid Agreement clauses , it is clear that if UK national gets pension from UK, such pension shall be taxable only in United Kingdom even if he is resident in India and earning taxable income in India and filing return of income. However, that is not the case of your uncle , perhaps. So, find out his citizenship. If he is citizen of UK, only in that case, pension is taxable only in UK and not in India. If he is citizen of India, in that case , he is rightly offering income taxable in India.
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