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Tax upon pension |
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The tax upon pension is an importance of source of government income. The paying branch plays the most important role for the deduction of Income Tax at source from pension payments. The deduction of tax upon pension process keeps in accordance with the rates prescribed by the government from time to time. While deducting the tax from pension payments, the paying branch also deduct or allow deduction on account of relief available under Income Tax Act from time to time. This whole procedure depend on the production of proper and acceptable evidence of eligible savings by pensioners.
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The paying branch also issue the pensioner in April each year a certificate of tax deducted in the form prescribed in the Income Tax Rules.
Under section 9(1)(iii) of the Income Tax Act, the accruing of pension is taxable in India only if it is earned in India. Pensions received in India from abroad, for past services rendered in the foreign countries, by pensioners residing in this country will be income accruing to the pensioners abroad. Therefore it will not 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.
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