US Government Pension Received In India Not Taxable Under India-USA DTAA: ITAT Delhi

The Delhi Bench of the Income Tax Appellate Tribunal has held that pension received by a US national from a US government retirement fund cannot be taxed in India merely because the amount was received here, as the India–USA Double Taxation Avoidance Agreement (DTAA) grants exclusive taxing rights to the United States. A Bench comprising Shri Satbeer Singh Godara (Judicial Member), while hearing the appeal filed by the assessee for AY 2016–17, examined whether pension received from a United States government retirement fund by an American national working in India could be subjected to tax in India, despite the specific exemption available under Article 19(2) of the India–USA Double Taxation Avoidance Agreement. The case at hand concerned an American citizen employed with the American Embassy School in New Delhi, who had received a pension of USD 43,042.20 from the Public Employees' Retirement Association in the United States. The amount, equivalent to ₹28.37 lakh, was treated as taxable income in India by the Assessing Officer and the addition was upheld by the first appellate authority. Before the Tribunal, the assessee argued that under Article 19(2) of the India–USA DTAA, pensions paid by a contracting state in respect of government service are taxable only in that state. It was contended that the treaty provisions override domestic tax law under Section 90(2) of the Income Tax Act, where they are more beneficial to the taxpayer. Rejecting the Revenue's stand, the Bench noted that there was no dispute about the nature of the pension or its source, and that Article 19(2) of the DTAA clearly exempts such government pensions from taxation in the other contracting state. The mere fact that the pension amount was received in India did not make it taxable here. The Bench held that since the DTAA provisions were more beneficial to the assessee, they would prevail over the Income Tax Act. In view of the above, the ITAT deleted the addition of ₹28.37 lakh and the appeal preferred by the assessee was allowed. Case Title: Jeanne Lee Cantrill v. DCIT, Circle-67(1) Case No.: ITA No. 6322/Del/2025 | AY 2016–17 Appearance for Assessee: Ms. Preeti Goel, AR Appearance for Department: Sh. Manoj Kumar, Sr. DR Click Here To Read/Download Order

US Government Pension Received In India Not Taxable Under India-USA DTAA: ITAT Delhi

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