You've spent years building your career in the UK. Your workplace pension has grown quietly in the background. Perhaps you've topped up a SIPP or tucked away savings in an ISA.
Now you're planning to return to India. And you're wondering: what happens to all of this?
I've advised many UK-returned NRIs who made expensive mistakes simply because they didn't plan their pension transition. Some faced unexpected tax bills. Others lost money to currency swings. A few discovered their ISA's tax-free status vanished the moment they became Indian tax residents.
Here's what you actually need to do-and when.
Understand Your UK Pension Options First
Most UK NRIs have one or more of these: a State Pension, a workplace pension, a personal pension, or a SIPP (Self-Invested Personal Pension).
Each behaves differently when you move to India.
Your UK State Pension will still be paid to you in India. You've earned it through National Insurance contributions. But here's the catch that surprises most people: your State Pension gets frozen at the amount you first claim. No annual increases. Ever.
If you stayed in the UK, your pension would rise with inflation each year. Over a twenty-year retirement, this difference compounds dramatically.
Your workplace and personal pensions give you three choices: leave them in the UK, transfer to a SIPP for consolidation, or transfer to an Indian QROPS (Qualifying Recognised Overseas Pension Scheme).
None of these choices is universally "right." The best option depends on your plans-and whether you're returning permanently.
👉 Tip: If there's any chance you'll move back to the UK or another country, think twice before transferring your pension out. Once you move funds to India, reversing that decision is complex.
What Happens to Your ISA?
This is where many returning NRIs get caught off guard.
Your ISA (Individual Savings Account) was tax-free in the UK. Interest, dividends, capital gains-all sheltered from tax while you were a UK resident.
The moment you become an Indian tax resident, that protection disappears.
India doesn't recognise ISA tax benefits. Once you're ordinarily resident in India, any income from your ISA-whether interest, dividends, or gains-becomes taxable in India at your applicable slab rate.
You can keep your ISA open after leaving the UK. Your investments can continue growing. But you cannot make new contributions while you're a non-UK resident.
The practical advice? Keep your UK bank account active. When you eventually withdraw from your ISA, receive the funds in your UK account first. Then remit to India. This creates a cleaner paper trail and helps with FEMA compliance.
You'll need to declare ISA holdings in Schedule FA (Foreign Assets) of your Indian tax return once you become a Resident and Ordinarily Resident.
The RNOR Window: Your Tax Planning Opportunity
When you return to India after living abroad for an extended period, you don't immediately become a fully taxable resident. You typically qualify for RNOR status-Resident but Not Ordinarily Resident.
During RNOR years (usually two to three years), your foreign income isn't taxable in India. This includes income from UK pensions, ISA withdrawals, and other overseas investments-as long as you don't bring that money into India.
This window is your biggest tax planning opportunity.
Use it wisely. If you're going to make withdrawals from UK accounts or sell foreign assets, doing so during your RNOR period can save you significant tax. You can use our Residential Status Calculator to check your exact timeline.
Once you become ROR (Resident and Ordinarily Resident), your global income-including UK pension payments-becomes taxable in India, subject to DTAA relief.
Should You Transfer Your UK Pension to India?
This is the question I get asked most.
A QROPS transfer moves your UK pension to an approved Indian scheme. HDFC Life, ICICI Pru Life, and Max Life offer HMRC-approved options.
Reasons to consider a transfer:
You're returning permanently and want your retirement corpus in rupees. You're concerned about GBP-INR currency fluctuations eroding your pension value over decades. You want to avoid potential UK inheritance tax on your pension (which can apply to estates above certain thresholds for non-spouse beneficiaries).
Reasons to keep your pension in the UK:
You might return to the UK someday. You have financial goals in pounds-perhaps children studying in Britain. You want the pension to keep growing in a familiar tax-deferred environment. You're worried about the QROPS transfer process, which can take months and involves regulatory paperwork.
There's also a potential tax charge on transfers. Moving your pension to an overseas scheme can trigger a charge unless the new scheme meets specific HMRC criteria. And if you return to the UK within ten years of transferring, additional taxes may apply on withdrawals you've already taken.
👉 Tip: Get Form APSS263 submitted within sixty days of requesting a transfer. Missing this deadline can result in unexpected charges.
The India-UK DTAA: How It Protects You
The India-UK Double Taxation Avoidance Agreement prevents you from being taxed twice on the same income.
For pensions, the general rule is that private pension income is taxable in your country of residence. Once you're an Indian resident, your UK workplace pension becomes taxable in India.
But you won't pay tax twice. You can claim credit in India for any UK tax already deducted.
To claim DTAA benefits, you need:
A Tax Residency Certificate (TRC) from HMRC-apply before you leave, as processing takes several weeks. Form 10F filed with Indian tax authorities. Your PAN card and passport copies showing residency.
Many NRIs skip this paperwork and end up paying more tax than necessary.
Section 89A: Defer Tax on Foreign Retirement Accounts
Here's a provision most people don't know about.
Section 89A of India's Income Tax Act lets you defer Indian taxation on foreign retirement accounts until you actually withdraw. This was introduced specifically to help returning NRIs who faced immediate tax liability on accounts like UK pensions and SIPPs.
Without Section 89A, India might tax your pension on an accrual basis-meaning you'd owe tax even on money still sitting in your UK account.
File Form 10-EE with your Indian tax return to claim this benefit. Miss the deadline, and you lose the deferral.
Your Pre-Return Checklist
Before you leave the UK:
Apply for your Tax Residency Certificate from HMRC. Consolidate scattered pensions into a SIPP if that makes sense for your situation. Inform your pension providers about your move and get clarity on how they'll handle an overseas address. Decide whether you'll keep or close your ISA-and understand the tax implications either way.
After you arrive in India:
Open an RFC (Resident Foreign Currency) account if you want to hold foreign currency in India. Convert your NRE and NRO accounts to resident accounts. Update your residential status with all financial institutions. File Form 10-EE before your tax return deadline to defer foreign pension taxation.
Use Belong's Compliance Compass to check you haven't missed anything.
A Smarter Way to Park Your Retirement Funds
If you're bringing retirement savings to India and want tax-efficient returns, consider GIFT City fixed deposits. These USD-denominated FDs offer tax-exempt interest and protect against rupee depreciation-relevant if you're worried about currency risk eating into your converted pension.
Compare options using our NRI FD comparison tool.
Final Thoughts
Your UK retirement accounts represent years of disciplined saving. Don't let poor planning erode their value.
The key decisions-whether to transfer your pension, when to make withdrawals, how to structure your return-depend on your specific circumstances. There's no universal answer.
But there is a universal principle: plan before you move, not after.
Have questions about managing your return to India? Join our WhatsApp community where thousands of NRIs share experiences and strategies. Or download the Belong app to explore tax-efficient investment options for your retirement corpus.
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