Article 18 - Pensions

Article 18 of the India-Bhutan DTAA addresses pensions and other similar remuneration paid in consideration of past employment. The default rule is that pensions are taxable only in the State of residence of the recipient - this avoids the awkwardness of taxing a retiree in a State they no longer live in.

Government / state pensions are usually covered separately by Article 19(2), which allocates exclusive taxing rights to the paying State (the State whose government paid the pension), with a residence-State exception where the recipient is a national and resident of the other State.

Social-security payments are dealt with in a separate paragraph in many India treaties - typically taxable only in the State paying the social-security benefit (since social security is generally non-taxable in the source State anyway).

Annuities purchased privately fall under Article 21 (Other Income) in most India treaties - exclusively taxable in the residence State.

Practical implications for NRIs: A former Indian government employee who has settled in Bhutan continues to be taxable in India on the pension under Article 19(2), unless they are now a national and resident of Bhutan. A private-employer pension earned in India and now paid to a retiree resident in Bhutan is taxable only in Bhutan. Form 10F + TRC required to claim the residence-only treatment.