Q.1257 Tax free Annuity income

in India may require reporting in

home country . . .

Question: I am NRI living in Canada as a Permanent Resident. I have NRE fixed deposit in India and although NRE fixed deposit is tax- free in India, I am paying tax in Canada on the FD interest income as Canada Tax is based on worldwide income. I am thinking of converting NRE fixed deposit to the private annuity provider in India ( immediate annuity ) because as per DTAA article 18 provision Quote “Pensions arising in a Contracting State shall be taxable only in that State”.Pensions shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State “ Unquote. Suppose if I buy a LIC Jeevan Akshay or Jeevan Shanti immediate annuity/pension policy, can the pension from it will only be taxable in India and not Canada ? is this interpretation correct? I really appreciate your feedback on the above query. Regards, Answer: Canadian residents are taxed on their worldwide income. In cases where no tax may be due where DTAA applies there are still reporting requirements when filling a Canadian Tax Return. Pension received from India or any other country must be reported when filling Canadian tax return by converting the amount received to Canadian dollars. Deductions available under DTAA can be claimed on line 256 [Exempt foreign income] of your tax return. It is best to speak to a Canadian tax consultant and get professional advice.