INCOME TAX

Circular No. 4

Dated 20/2/1969

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.