Question 1

What is Section 89A relief for foreign retirement accounts?

Accepted Answer

Section 89A allows Indian residents to defer taxation on annual accruals in foreign retirement accounts (like 401k, IRA, UK pension) until actual withdrawal. Without this, accruals would be taxed annually as income. File Form 10-EE to claim this benefit.

Question 2

How do I file Form 10-EE for Section 89A?

Accepted Answer

File Form 10-EE on the income tax e-filing portal before filing your ITR. Provide details of the foreign retirement account, employer information, and accrual amounts. Once filed and acknowledged, accruals are not taxed until you make withdrawals.

Question 3

Is my 401k withdrawal taxable in India?

Accepted Answer

Yes, 401k withdrawals are taxable in India for residents. However, you can claim Foreign Tax Credit (FTC) for taxes already paid in the USA. The effective tax depends on the DTAA treaty rate (15%) vs Indian slab rate. File Form 67 to claim FTC.

Question 4

What is the tax on Roth 401k withdrawals in India?

Accepted Answer

Roth 401k withdrawals may be tax-free in the USA (as contributions were post-tax), but they are still taxable in India for resident taxpayers. India does not recognize the Roth tax-free status. File using ITR-2 and report under foreign income.

Question 5

Do I need to report my 401k in Schedule FA?

Accepted Answer

Yes, 401k and other foreign retirement accounts must be reported in Schedule FA (Foreign Assets) even if you have filed Form 10-EE for Section 89A deferral. Non-disclosure attracts penalties under the Black Money Act.

Foreign Retirement Account Taxation (401k/IRA)

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