Relief from Taxation of Income from Foreign Retirement Benefit Account
Introduction
Section 89A provides resident individuals the option to defer tax on income from foreign retirement benefit accounts. Instead of taxing the income on an accrual basis, tax is deferred to the year of withdrawal, applicable to accounts in notified countries and by filing Form 10EE electronically.
Eligibility for Relief under Section 89A
- Resident individuals with foreign retirement benefit accounts.
- The account must be in a notified country.
- The individual must have been non-resident in India and a resident of the notified country when the account was opened.
- Income is taxed in the notified country only at the time of withdrawal or redemption.
Notified Countries
As per Notification No. 25/2022, dated 04-04-2022, the following countries are eligible:
- Canada
- United Kingdom
- United States of America
How to Claim Relief
- File Form 10EE electronically on or before the due date for the income-tax return.
- The option applies to income accrued on or after 01-04-2021.
- Once exercised, the option applies to all subsequent years and cannot be withdrawn.
Taxation Rules ( Rule 21AAA)[ Notification No. 24/2022, dated 04-04-2022]
- Income is taxed in the year of withdrawal or redemption in the notified country.
- Income already taxed in India or exempt due to prior non-residential status is excluded.
- Foreign tax credit is disallowed for excluded income.
Non-Resident Status in Subsequent Years
- If the individual becomes a non-resident after opting for Section 89A, the option is deemed void.
- Income accrued in the specified account during the option period becomes taxable.
- Tax must be paid before the due date for filing the income-tax return for the year of becoming non-resident.