Many Indian nationals spend time working abroad. Whilst working in the United Kingdom Pension benefits may accrue via employers’ occupational or personal pension schemes.
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Depending on the length of time and contributions, pension funds of significant value can accrue. If the individual returns to India or becomes resident outside of the United Kingdom a QROPS should be considered. The QROPS should be in a jurisdiction with a double taxation agreement with India.
Under section 9(1)(iii), pension accruing 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.
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.
A QROPS will allow the release of UK Pension funds facilitating gross cash and/or income payments to be made to an Indian resident.
Many Indian based QROPS will restrict tax free cash to 33% with the residual fund benig used to purchase an annuity. Other global QROPS are therefore essential to consider.
Contact Gerard associates Ltd for more information: info@gerardassociates.co.uk
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