Q.1026 OCI permanently

moving to India - Dual taxation

avoided with DTAA

Question: Thank you Mr VK Chand for the informative answers on NRI information website. I am retired in USA, get pension and social security. Planning permanently to move back to India but keeping US citizenship, and my OCI status. For tax purposes I will be RNOR the first year. Will the US income be taxed in India from third year onwards because RNOR status needing 9 PPY/10 PPY cannot be met? Since I will be paying US taxes on US income and India has DTAT treaty with USA, would that help in avoiding double taxation? Thanks in advance. Gyani Baile Answer: The purpose of Double Tax Avoidance Treaty [DTAA] is to ensure that citizens of both signing countries are not taxed twice on the same income. So DTAA will ensure double tax avoidance. Since your income will be in the form of USA pension, under DTAA agreement between India and USA, taxation of pension income is spelled out in two articles. Article 19 refers to government pensions and Article 20 refers to pensions received from private sources. This topic was discussed in FAQ number 472

USA pension may not be taxed in India

As for taxation of your USA pension in India, under DTAA Article 20(2) which states: “. . . . . 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. DTAA rules would be applicable even when a US resident does not have the benefit of RNOR and becomes an ordinary resident in India. Seek guidance on tax issues from a professional tax consultant when you decide to move to India.