Indian Pension and the US DTAA: Who Taxes It—India, the US, or Both?

As a US citizen receiving a pension from India, you are probably plagued by one question: am I going to be taxed on it twice? You paid into that pension in India, you now file in the US, and nobody has given you a straight answer.

The good news is it is answered by the Indian pension US DTAA — the India–United States Double Taxation Avoidance Agreement — which, as mentioned, is dependent on the type of pension. A government pension is not treated in the same way as a private pension and may or may not be subject to TDS prior to the pension being paid out of India. This guide explains the governing treaty article, the “reality” of the India side of the TDS, and the way the overlap is eliminated via the Foreign Tax Credit, making pension India USA DTAA tax questions a checklist — not a source of worry. 

Which DTAA Article Governs Your Pension: Article 19 vs Article 20

All the rest of this guide depends on one question—is this guide for one of your pension articles? The India–US DTAA doesn’t classify “pension” as one category; it has broken the pension income into categories depending on whom you used to pay. 

Article 20 — Private Pensions & Social Security

The second article, under the heading Private Pensions, Annuities, Alimony, and Child Support, deals with pensions from private employment, that is, from a different institution from the government, such as a corporate employer, a bank, an NGO, etc. With this article, a private pension would only be taxable at the domicile. The treaty begins with the US having the taxing right if you have settled in the US and get a pension from an Indian private sector employer. 

The twist in this part of Article 20 is that this provision is not contained in the treaty’s “saving clause” that allows each nation to have its own domestic laws impose taxes on its own citizens and residents even as a result of the treaties. Even if you are now living in the USA, however, India can tax the pension that was paid to you — both countries have a claim to the payment and the Foreign Tax Credit (see below) prevents double taxation. Other public pensions, such as social security benefits, are also included in Article 20 and are typically taxable only in the state where they are paid. 

Article 19 — Government-Service Pensions

Article 19, Remuneration and Pensions in Respect of Government Service, deals with payments made by the Government of India (or state/union territory) for services previously rendered by a government official, whether central or state, or a PSU pensionable post, or a defence pension. They are typically taxable only in India (the source country), except if both citizens and residents of the US, in which case the principle may be different. Identify the governing article first; don’t wait until the end.

Private vs. Government v. Social Security Pension: How Each Is Taxed

Once you know your pension’s category, the practical outcome looks like this:

The nuance to hold onto: for a private pension, “residence-taxed” doesn’t mean India’s hands are tied. Because paragraph 1 of Article 20 isn’t carved out of the saving clause, India can still assert a domestic tax claim on its own source income — which is exactly why the Foreign Tax Credit mechanism below matters more than the “which article applies” answer alone.

Is TDS Deducted on Your Indian Pension? (Section 195, Commuted vs. Uncommuted)

This is the section most explainers overlook, and it’s the section that actually impacts your monthly bank credit. When you receive your pension in India whilst overseas, you will not be given the entire amount; the Indian tax law requires them to withhold tax at source. 

When TDS Applies and at What Rate

A pension received from an Indian source by an NRI is subject to TDS under Section 195 of the Income Tax Act, which deals with TDS on payments to non-residents. The pension amount paid to an NRI is actually a Section 195 payment, and banks automatically apply the slab rate without you having to do anything. The indicator doesn’t start “clipping” below a certain level, so the deductor must make the choice between the domestic rate and the DTAA rate, which is more beneficial—but only when you have provided him with the document to claim it.

To avail the treaty rate to be applied at the place of payment rather than getting the refund later, submit a Tax Residency Certificate (TRC) in the US and Form 10F to the pension paying bank/trust in India. This should be done once a year, and TDS is worked out properly from the very first payment and not corrected after some months. 

Commuted vs. Uncommuted Pension

The TDS picture also depends on how the pension is structured:

• Uncommuted pension—the regular monthly payout—is taxed as salary income at slab rates, and TDS applies to each payment.
• Commuted pension—a lump sum taken instead of part of the future monthly pension—may be wholly or partly exempt depending on whether the pension is from government or non-government service, with different exemption fractions for each. A commuted lump sum from a government pension is typically exempt in full; from a private employer, the exemption is partial.

Both figures still need to be reported correctly against the governing treaty article when you eventually reconcile your India and US filings.

How the DTAA + Foreign Tax Credit Removes the Double Tax

This is the section that actually resolves the anxiety this guide opened with.

Article 25: The Treaty’s Double-Tax Relief

Article 25 of the India–US DTAA is the relief-from-double-taxation article. It’s what makes the Article 19/20 split workable in practice: even where both countries retain a taxing right — as can happen with a private pension under the saving clause — Article 25 obliges each country to give credit for tax paid to the other, so the same income isn’t taxed twice in substance, even if it’s technically taxed twice on paper.

Claiming the Credit: Form 67 (India) and the US FTC

On the US side, the IRS allows a Foreign Tax Credit for Indian tax paid on the pension, claimed on your US return and capped at the US tax attributable to that foreign-source income.

On the India side, if you’re also filing an Indian return with Indian tax withheld or paid, the route is Section 90 read with Rule 128, claimed by filing Form 67 — a statement of foreign income and foreign tax paid, filed electronically before your Indian return (or by the assessment-year deadline under current Rule 128 timelines). Skip Form 67, and the credit is disallowed even if you were otherwise entitled to it — this is a paperwork step, not a discretionary one.

Coordinating Two Tax Years (Apr–Mar vs Jan–Dec)

A wrinkle competitors rarely mention: India’s financial year runs April to March, while the US tax year runs January to December. Most NRIs end up finalizing the Indian tax position first, then using those figures to support the US FTC claim for the corresponding calendar year. Keep your Indian TDS certificates and Form 67 documentation on hand when your US CPA prepares Form 1116.

A Worked Example: NRI in the US With an Indian Pension

Suppose Ravi is a US tax resident drawing an uncommuted private pension of ₹6,00,000 a year from his former Indian employer’s pension trust.

1. In India: The trust, following Section 195, withholds TDS. Because Ravi submitted a TRC and Form 10F, withholding is applied at the treaty rate rather than the higher default slab rate.
2. In the US: As a US tax resident, Ravi reports the pension as part of his worldwide income, converted to dollars.
3. The fix: Ravi claims a Foreign Tax Credit on his US return for the Indian tax withheld, via Form 1116, offsetting the US tax otherwise due on that same income.

Conclusion

The rule of thumb: government-service pensions stay with India under Article 19, private and social-security pensions default to your US residence under Article 20, and TDS under Section 195 is a near-certainty on India-sourced payments unless you’ve filed a TRC and Form 10F. Whatever the split, it’s the Foreign Tax Credit— claimed via Form 1116 in the US and Form 67 in India—that actually prevents double taxation in practice.

This article is informational and not tax advice. Pension taxation depends on your specific residency status, the nature of your pension, and both countries’ filing rules, which change from year to year. Consult a Chartered Accountant in India and a US CPA—ideally one experienced in cross-border NRI taxation—before you file and before claiming a treaty position.

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