The big picture
QROPS tax sits at the intersection of two regimes: HMRC's pension-transfer rules on the UK side, and Indian income-tax rules on the receiving side. Most NRIs only need to think about three things: the 25% Overseas Transfer Charge, the 55% unauthorised payment charge, and how Indian withdrawals are taxed. Get those right and your transfer is clean.
The 25% Overseas Transfer Charge (OTC)
HMRC may apply a 25% charge on QROPS transfers in 2026. The exemption that NRIs typically rely on is "country of residence": if the receiving QROPS is in the country where you are tax-resident, the charge does not apply.
For an NRI tax-resident in India transferring to an Indian QROPS, the OTC therefore typically doesn't apply — but the timing matters. HMRC tests residency at the moment of transfer and continues to look at it for the five years that follow. If you change residency in that window, the charge can be retrospectively triggered.
Practical takeaway
Most clients we work with either complete the transfer after they're firmly established as Indian tax residents, or they document residency intent in a way that aligns with HMRC's tests. Don't transfer in a residency grey area.
The 55% unauthorised payment charge
If your UK pension is transferred to a scheme that isn't on HMRC's ROPS list, HMRC can treat it as an unauthorised payment and charge up to 55% of the transferred amount. There may also be additional surcharges and scheme sanction charges.
This is the single biggest reason transfers must only ever go to HMRC-recognised schemes — verified live, against the current ROPS register. Schemes can move on or off the list; checking once doesn't cut it.
The UK-India DTAA
The UK-India Double Taxation Avoidance Agreement determines how pension income is taxed when an NRI is tax-resident in India. The treaty's pension articles generally allocate primary taxing rights to the country of residence (India) for non-government pensions, with reliefs preventing double taxation.
The exact mechanics depend on the type of pension, the source of contributions, and your residency history. The typical NRI position — private UK pension, transferred to QROPS, drawn while tax-resident in India — usually means Indian tax applies on withdrawals, with credit for any UK tax that may have been deducted at source.
Indian taxation of QROPS withdrawals
Once your funds are in an Indian QROPS scheme, withdrawals are generally subject to Indian income-tax rules. The exact treatment varies by scheme structure:
- Lump-sum withdrawals may attract tax under section 56 or scheme-specific rules; some structures allow a portion as a tax-free corpus return.
- Regular pension income is typically taxed as income from pensions under the head "Salaries".
- Surrender or commutation can have different treatment again.
Indian tax rates apply at slab rates — the same as your other Indian income. Your scheme will normally deduct TDS at source where applicable.
TDS at the Indian end
Indian schemes typically apply TDS on pension withdrawals based on the recipient's PAN and the slab rate that would apply. NRIs and resident NRIs need a valid PAN to avoid the higher TDS rate. Once you've filed your Indian return for the year, any over-deduction is refundable.
Reporting obligations
Two reporting layers to be aware of:
- Indian Income Tax Return. Pension income from a QROPS must be declared in your annual ITR. NRIs who become resident-NRIs after relocation also typically need to disclose foreign assets in Schedule FA for the years where Indian residency is established but UK assets remain.
- UK reporting. The QROPS scheme administrator may have member-payment reporting obligations to HMRC for ten years post-transfer; this is mostly invisible to you.
The 2027 UK inheritance tax change
From April 2027, UK inheritance tax (IHT) is expected to apply to unused pension funds on death. NRIs leaving large UK pension pots untouched could see the post-2027 IHT exposure significantly affect what beneficiaries receive. Transferring into an Indian QROPS while you're tax-resident in India can move the assets out of UK IHT scope — one common reason this is on a lot of NRIs' radars now.
Get your tax position modelled
Free cross-border tax review
OTC analysis, DTAA mapping, Indian withdrawal tax modelled together — in writing.
Common tax mistakes
- Transferring before establishing tax residency in India. Triggers OTC.
- Picking a scheme not on the ROPS list. Triggers up to 55%.
- Forgetting the 5-year retrospective window for OTC. Residency changes can claw back the exemption.
- Skipping Schedule FA disclosure in the year of transition. Penalties for non-disclosure of foreign assets are steep.
The honest disclaimer
Tax outcomes for any specific transfer depend on your residency, scheme structure, drawdown plan and the live tax position. The information here is general and educational. Specific personal advice should be sought from a qualified tax adviser. Our QROPS specialists model the tax position before any transfer goes ahead and we always recommend confirming with a tax adviser in your jurisdiction before drawing income.
Final word
QROPS tax is rarely the deal-breaker NRIs fear — it's just an area where shortcuts are expensive. With the right residency timing and a scheme that's on the ROPS list, the framework works as intended.
