Indian pension in Australia: two treaty articles and the EPF balance

A retired central government officer in Adelaide draws an Indian government pension. While the officer is resident here but not a citizen, the tax treaty between Australia and India makes that pension India’s to tax; once the officer also holds Australian citizenship, it is Australia’s alone. The treaty makes a private Indian pension in Australia taxable only here, provided the pensioner counts as an Australian resident under it.

Tax withheld in India does not settle the matter. The Australian Taxation Office (ATO) says most foreign pensions and annuities are taxable in Australia even when the paying country has withheld tax. Its 2026 tax return instructions add that under Australia’s tax treaties, “foreign tax authorities tell us about foreign source income paid to (and the tax withheld from) Australian resident taxpayers”. The rules bear on parents retiring here on an Indian pension and on people who left India with a provident fund balance. Temporary residents, broadly people on temporary visas without an Australian citizen or permanent resident spouse, are not taxed here on most foreign income, the ATO says.

Two treaty articles cover an Indian pension in Australia

Signed in Canberra on 25 July 1991 and amended by a protocol signed in December 2011, the treaty deals with pensions in two articles. Article 18 sets the general rule: annuities and every pension other than those for government service are taxable only in the recipient’s country of residence.

Article 19 carves out any pension “paid by, or out of funds created by,” India, one of its political subdivisions or a local authority, for services rendered to that government. Such a pension is taxable only in India unless the recipient is “a resident and a citizen” of Australia; then it is taxable only here. Pensions for work in a government business go back to the ordinary rules, Article 18 among them. Where a foreign pension is not taxable in Australia, the myTax instructions say it is left off the return.

The treaty names neither the EPF nor the 1995 scheme

India’s Employees’ Provident Funds Scheme of 1952, the EPF, and its Employees’ Pension Scheme of 1995 are run by a board of trustees, assisted by the Employees’ Provident Fund Organisation under the labour ministry. Neither is named in the treaty; the ATO’s synthesised text never mentions provident funds, and its 2026 myTax instructions on foreign pensions do not mention India. Neither document says which pension article covers a pension from the 1995 scheme.

The provident fund balance raises a separate question: whether Australian law treats the fund as a foreign super fund. The ATO says such a fund may be known in its home country as “a retirement fund, pension fund, retirement savings plan or similar”, yet its foreign super pages do not mention India’s scheme. For individual cases it issues private rulings, which it says legally bind it when they apply to a person who relies on them.

Six months from becoming a resident

For money that counts as foreign super, the ATO’s rules turn on timing. A lump sum received within six months of becoming an Australian resident for tax purposes is tax-free if two conditions hold. It must relate only to a period when the person was not a resident, or to a stretch after residency began that ended before the payment. Nor may it exceed the amount vested in the member.

After six months, the part of a withdrawal that relates to applicable fund earnings goes into assessable income. The ATO describes these, broadly, as earnings on the foreign interest accrued since the person became a resident; section 305-75 of the Income Tax Assessment Act 1997 sets out the exact calculation.

Earnings can be taxed inside an Australian fund

The ATO sets out one other route: a transfer into a complying Australian fund, where the foreign fund’s rules and home-country law allow it. It is treated as a member contribution and can count towards contribution caps. A member can choose to have some or all of the applicable fund earnings taxed inside the Australian fund, where the rate is generally 15 per cent.

That choice requires the whole interest to move directly, with none left behind, and more than six months since residency began or the foreign job ended. The Australian fund must also have the member’s tax file number within 30 days of any transfer, or return the whole amount to the foreign fund.

Indian tax counts only as far as the treaty allows

The treaty allows Indian tax, paid under Indian law and in line with the treaty, as a credit against Australian tax on an Australian resident’s income from Indian sources. The ATO’s 2026 guide to the foreign income tax offset draws the same boundary: only tax correctly imposed under foreign law and any tax treaty counts. In its example, a treaty caps a country’s tax on interest at 10 per cent, the country charges 25 per cent, and only 10 per cent counts. The taxpayer “would need to seek a refund of the balance” from that country’s tax authority.

For pensions, the myTax instructions tie the offset to withheld tax that the person had no right to have refunded, on a pension that is also taxable in Australia. Both pension articles in the India treaty use the word “only”. The ATO adds that someone receiving a pension from a treaty country may be able to arrange for tax not to be withheld from future payments.

Read together, the treaty asks two things of a pension: whom the work was done for, and where the pensioner is resident and holds citizenship. For the officer in Adelaide, citizenship decides which country may tax it. A provident fund balance gets no article of its own; if it counts as foreign super, the ATO’s rules, broadly, count earnings from the day a person became a resident.