Which pension you draw decides who taxes it
An Indian pension is not taxed as one thing. The treaty between India and your country of residence draws a line based on where the pension comes from, and that line decides almost everything.
A government pension : paid because you rendered service to the government, is generally taxable in India, the country that pays it, under the treaty's government-service article. A private or ex-employer pension, and an annuity you purchased with a retirement corpus, fall under the treaty's general pension article, which generally hands the taxing right to your country of residence. In most treaties the general pension article sits at Article 18 and the government-service article at Article 19, though the exact numbering and wording vary from one treaty to the next.
| Type of pension | Generally taxed in |
|---|---|
| Government service pension | India (source country) |
| Private / ex-employer pension | Country of residence |
| Annuity bought with a corpus | Country of residence |
The table is the general pattern, not a guarantee for every treaty. Some treaties phrase the pension article differently, and a few attach conditions. So the first job on any Indian pension is to read the specific treaty for your country of residence against the kind of pension you actually draw, rather than assume the common pattern applies.
TDS on the pension, and why a deduction isn't the final word
A pension paid in India is normally subject to tax deducted at source before it reaches you. The payer, whether a government treasury, an ex-employer's fund or an insurer paying an annuity, deducts and deposits it. That deduction is an advance, not a final tax. It shows up in your Indian tax records, and what you ultimately owe is settled when the Indian return is filed.
This is where the type of pension and the treaty meet the practical mechanics. If you draw a private or annuity pension that the treaty says is taxable only in your country of residence, India may still have deducted TDS at source. You don't simply lose that money: the Indian return is where you claim the treaty position, show the income as not taxable in India, and recover the deduction as a refund. To stand on the treaty you need a tax residency certificate from your country of residence and the supporting declaration that goes with it.
For a government pension that is taxable in India, the logic runs the other way. The TDS is against a genuine Indian liability, and the return reconciles it to the correct final figure rather than recovering it. Either way, the deduction at source is the starting point, and the return is what makes it right.
Section 89A: a narrow relief that is easy to misapply
Section 89A comes up often enough in pension conversations that it is worth placing precisely, because it is not about an Indian pension at all. It is a relief for income from a foreign retirement account: a US 401(k) or IRA, a UK pension, a Canadian RRSP, held by someone who is now resident in India. It exists because India would otherwise tax that foreign account's income as it accrues, while the foreign country taxes it only on withdrawal, creating a timing mismatch.
The relief is narrow in two ways. It applies only to accounts in notified countries : the United States, the United Kingdom and Canada, and it is claimed by making the Section 89A election on Form 10-EE (Rule 21AAA) before the return. It does not touch an Indian government or private pension, which is governed by the treaty articles described above.
So Section 89A is relevant only at the edge of this topic: if, alongside an Indian pension, you also hold a foreign retirement account and you have become resident in India, it may apply to that foreign account. For the Indian pension itself, the question stays with the pension article of the treaty, not Section 89A.
A worked example: a government pension and a private pension to the UK
Ramesh retired from an Indian state government post and also draws a smaller pension from a private company he worked at earlier. He now lives in the United Kingdom and is tax-resident there.
His CA separates the two. The government pension is generally taxable in India under the treaty's government-service article, so India keeps the taxing right; the TDS deducted on it is reconciled on his Indian return to the correct final figure. The private-company pension falls under the general pension article, which gives the taxing right to the UK as his country of residence, so even though India may have deducted TDS on it, he claims the treaty position on his Indian return, shows that slice as not taxable in India, and recovers the deduction as a refund, supported by a UK tax residency certificate.
The result is one clean Indian return that taxes the government pension here, releases the private pension to the UK, and recovers what was over-deducted. How the UK then taxes the private pension is handled by his UK preparer; the Indian side is simply settled to match the treaty.