Treatment of lumpsum received from India Public Provident Fund (PPF)

Dear Team, I wish to know how to calculate gains for lumpsum received from Indian Public Provident Fund for the purpose of reporting it in offshore income/gains. Is it treated as pension and can I therefore deduct 1. the value as of 5th April 2017 from the total 2. Deduct an additional 25% from the remaining amount from point 1 above as tax free lumpsum. And report the remaining 75% balance as gain? Kindly advise. Thanks

Hi Saurabh Jain,

There is no relief for 'trivial commutation lump sum' for payments from an Indian pension.

 This means that the lump sum is taxable in India.

 It is also taxable in the UK.  

In the UK, the first 25% of the lump sum is tax free, with the remainder being taxable.  

You  would declare the taxable element on a Self Assessment tax return and claim tax relief for any tax paid in India on the lump sum.

Thank you. 



 

Dear Team, Thank you so very much for coming back to me on this. Can you please confirm that I can treat lumpsum received from Indian Public Provident Fund as an overseas pension and not treat it as savings/interest on savings? Thanks & Regards

Hi,

Yes, this will be declared as a pension.

Thank you.

HI HMRC admin Won't it be considered as saving product because it has fix locking period and after 10 or 15 years it will be payable whole not like pension, which is payable after a certain age in the case of the PPF of India you can get after whole period even in the age of 35year

Hi,

There is no relief for 'trivial commutation lump sum' for payments from an Indian pension.  This means that the lump sum is taxable in India.  

It is also taxable in the UK.  In the UK, the first 25% of the lump sum is tax free, with the remainder being taxable.  

You  would declare the taxable element on a Self Assessment tax return and claim tax relief for any tax paid in India on the lump sum.

Thank you.

Hi, I am trying to file the self assessment online but not able to find which section should be used to report the PPF lump-sum. Can you please help? Also, from the https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75550 I understand that the value of PPF before 6 April 2017 could be deducted from the final lump-sum amount (See Example 1). Is that understanding correct? Thanks! Mukesh

Hi,

This should be reported as foreign income and as a pension within that section.

You will only qualify for relief of the amounts before 2017 if your pension scheme was not an employer-financed retirement benefit scheme immediately before 6 April 2017, for example, a personal pension scheme.

Thank you.

My Indian public provident fund (PPF) account has been recently closed by the bank, and I got a lump sum amount. This is an Indian government scheme, and I fully arranged it personally without the involvement of any employers. So, I assume it qualifies for relief of the amounts accrued before 2017 (as mentioned in the document eim75550 referred to above). Could you please confirm if the below calculation is correct? For example, if the lump sum received in Nov 2022 was £32,000. And the amount accrued before 6th April 2017 was £20,000. 1. Could you please confirm whether the amount to be declared for tax is £12,000 (£32,000 - £20,000)? 2. And also could you please confirm if I am eligible for a further 25% relief which will be £9,000 (£12,000 * 75/100)?

Hi,

The starting point is that 100% of the lumpsum is taxable. EIM75550, advises that the lump sum prior to 6 April 2017, is not taxable, so this should be deducted from the lump sum. Of the remainder, a further 25% can be deducted in respect of a lump sum payable under an overseas pension scheme where an amount would not be liable to Income Tax if it was paid under a registered pension scheme. For this reason, deduct a further 25% from the remainder, as shown in your example.

Thank you.