Pensions for Expats in India

Submitted: August 2013

India has a tax-efficient contribution-based private system, where contributions to pension funds are not subject to tax unless they exceed certain limits.

Unless you work in the unorganised sector (like 88% of Indian workers), pension contributions are generally mandatory in India. However, Indian pension rules are not really harmonised and pension portability is not always easy to achieve.

According to the IMF, India’s superannuation industry still has many structural reforms to undergo, as it identified a poor administration and an overly conservative investment policy, which is bad for the capital growth of your pension pot.

Voluntary salary sacrificing towards pension benefits is also widespread, at least to the extent that it is not made void by taxation of deemed fringe benefits.

India has taxpayer-funded benefits for senior citizens, and these are only designed to supplement the private system.


Superannuation in India

India grants tax relief in respect of contributions to a qualifying pension scheme. As a general rule, pension contributions must not exceed ₹1,00,000 or 27% of the employee’s gross salary (whichever is lower). If you are a non-resident, only your Indian-source salary is taken into account. For more information on tax residence, see TAXATION – Overview of Tax Issues for Expats in India.

Pension contributions above the maximum allowable amounts are taxable (up to 30% plus surcharges), no matter if they are paid by you or your employer.

Once your funds are within the pension pot, the capital is allowed to grow tax-free. Of course, the pension pot is regulated by law and it needs to comply with certain rules. For instance you may be restricted from investing in certain assets, or from leveraging your investments to make them higher risk/higher return. Although these regulations are primarily designed to avoid hidden distributions, they may have non-negligible consequences from a financial point of view.

You can draw on your Indian superannuation only in the event of:

If you leave India, you may withdraw your Indian superannuation benefits to the extent that you retire permanently from the Indian workforce.

Mandatory system

Pension contributions have been made mandatory by the Employees’ Provident Funds and Miscellaneous Provisions Act 1952. There are different mandatory pension schemes, including:

Generally, both the employee and the employer have to contribute towards superannuation benefits, but the rates may vary depending on the scheme.

If you happen not to have any social security coverage in India, it is strongly advisable to save money towards retirement for yourself.

Superannuation practical tips

First and foremost, you should view superannuation as a complex financial product on which you are charged fees to get the superannuation industry running. These fees may vary greatly from one superannuation product to another.

From a practical point of view, you should:

Be also wary of superannuation scams, as expatriates are easy targets for fraudsters.

Expatriates and Indian superannuation

Salary sacrificing may not be an advantageous option if you are an expatriate. This is because the tax benefits at contribution-level may be completely offset by higher tax charges at payout-level. You should seek professional advice to check how your Indian pension payouts may be taxed.


International matters

Social security agreements

India may have entered into a social security agreement with your home country. These agreements are primarily designed to avoid discrimination and double social security coverage. In addition, they may “totalise” your periods of contributions in India and in your home country. This is particularly helpful if your home country expects you to contribute for a long time (e.g. you must have contributed for 40 years to avoid a pension rebate).

A list of social security agreements concluded by India is available here.

International superannuation planning

Superannuation schemes are tax-efficient products in India. Thus, they are heavily regulated in order to avoid undue tax base erosion. The same fundamental principle is likely to apply to foreign equivalents. Thus, you should check:

Your home country may have a tax treaty with India to avoid double taxation on your foreign pensions. As a general rule, pension payouts are only taxable in your country of residence. That said, you should check your tax treaty to make sure you don’t fall under an exception.

Retaining your foreign pension arrangements may be the most practical option if you don’t intend to stay in India. Nevertheless, cross-border superannuation planning is always on a case-by-case basis. It is strongly recommended to seek professional advice regarding this matter.


» Money Transfers for Expats in India
» Foreign Exchange for Expats in India
» Banking for Expats in India
» Pensions for Expats in India
» Investment for Expats in India
» Wealth Management for Expats in India
» Property Investment for Expats in India
» Insurance for Expats in India



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