US Social Security after you move back to India, and why India does not tax it

The treaty settles this cleanly. Under Article 20(2) of the India-US treaty, social security benefits and other public pensions paid by one country are taxable only in that paying country. So US Social Security is a US-only item, and India does not tax it, even after you become a resident and ordinarily resident taxed on your worldwide income.

This is worth stating precisely because the opposite is true for a private pension. A 401(k), an IRA or a private annuity falls under Article 20(1), which assigns the taxing right to your country of residence. Once you are an Indian resident, India can tax a 401(k) or IRA distribution (subject to the timing relief in Section 89A). So two payments that both come from the US, and both feel like retirement money, are treated in exactly opposite ways: the Social Security is India-exempt, the 401(k) is India-taxable. Getting them on the right side of that line is the whole point.

The most common worry is that once the Social Security lands in an Indian bank account it becomes Indian income. It does not.

India's domestic law taxes income received in India, but Section 90(2) lets you take whichever position is more beneficial, the domestic law or the treaty. Where the treaty says an income is taxable only in the US, that beats the domestic received-in-India rule. So the account the money is paid into does not decide the tax; the treaty does. Whether your Social Security is credited to a US account, an NRE account or an ordinary savings account in India, the answer is the same: taxable only in the US. Section 90(2) becomes Section 159 under the Income-tax Act 2025, but the override works the same way.

Not taxed is not the same as not reported. Two disclosures still apply once you are ordinarily resident, and skipping them is what turns a clean position into a notice.

First, the Social Security is shown as exempt income in your Indian return, in the exempt-income schedule, so the department sees why nothing was taxed on it. Second, if you hold a US account or retirement asset connected to it, that foreign asset goes in Schedule FA every year, with no minimum value threshold. Schedule FA is a disclosure duty separate from tax, and the Black Money Act 2015 treats a missing foreign asset as a default in its own right, regardless of whether any tax was due. So the sequence is: claim the treaty exemption on the income, and disclose the asset anyway. The exemption protects the tax; the disclosure protects you from the penalty.

Ravi worked in the US for over twenty years and moved back to Pune, where he is now ordinarily resident. He draws US Social Security of about 2,000 dollars a month, and he also takes withdrawals from a 401(k).

The two are taxed differently. His Social Security is taxable only in the US under Article 20(2), so India does not tax it, even though it is paid into his Indian bank account. His 401(k) withdrawals fall under Article 20(1) and are taxable in India as his country of residence, with a foreign tax credit for the US tax withheld.

His CA reports the Social Security as exempt income, computes and pays Indian tax only on the 401(k) withdrawal, claims the credit for the US tax on it, and discloses both US sources in Schedule FA. Ravi pays India nothing on the Social Security and the right amount on the 401(k), and there is no mismatch for the department to query.