If you have moved back to India after working in the United States, the United Kingdom or Canada, there is a good chance you have left a retirement account behind. A 401(k) or 401(a) with a former US employer. An RRSP in Canada. A workplace pension in the UK.

You are not withdrawing from it. You may not touch it for another twenty years. But it keeps growing quietly every year, and once you become Resident and Ordinarily Resident in India, that growth becomes taxable here.

This creates a problem that many returning professionals do not see coming until the first notice arrives.

The Mismatch That Creates the Problem

India taxes the annual accretion in your foreign retirement account as it accrues. The United States, the United Kingdom and Canada do not. They tax the money when you take it out.

So, in the years when the account grows, India wants tax and the foreign country does not. Then years later, when you finally withdraw, the foreign country deducts its tax and India has already taxed the same growth.

You end up paying tax in both countries on the same income, at different times. Because the timing does not match, foreign tax credit under the treaty often cannot rescue you. The credit is meant to relieve tax on the same income in the same year, and here the years do not line up.

Section 89A was introduced to fix precisely this.

What Section 89A Does

Section 89A, read with Rule 21AAA, lets you defer Indian tax on the annual accretion in a notified retirement account. Instead of paying tax every year as the account grows, you pay it in the year the money is taxed in the other country, which is the year you withdraw.

The timing then matches. Both countries tax the same income in the same year, and foreign tax credit works the way it is supposed to.

The relief is not automatic. You have to claim it, and you claim it by filing Form 10-EE.

Who Can Use It

You need to satisfy all of the following.

The account is in a notified country. Only three are notified: the United States of America, the United Kingdom and Canada. Retirement accounts in Australia, Singapore, the Gulf or anywhere else do not qualify, regardless of how similar they look.

It is a retirement benefit account. A 401(k), 401(a), IRA, RRSP or a UK workplace pension will generally qualify. An ordinary brokerage account will not, even if you are holding it for retirement.

You opened the account when you were a non-resident of India and a resident of that country. An account you opened from India does not qualify.

You are now Resident and Ordinarily Resident in India. If you are still non-resident, or in your RNOR years, your foreign income is outside the Indian tax net anyway and the section has nothing to do.

The Deadline That Catches People Out

Form 10-EE must be filed on or before the due date under section 139(1), and it must be filed before you upload your return.

This is where most claims fail. People file the return, then discover the form, then try to file it afterwards. By then the return has already gone in without the deferral, and the relief for that year is gone.

If you are filing for assessment year 2026-27, the form has to be in before your return, and the return has to be in by 31 July or 31 August 2026 depending on which applies to you.

The Decision Is Permanent

This is the part to think carefully about.

Once you exercise the option for a year, you cannot withdraw it, not for that year and not for any year after it. It follows the account for as long as you hold it.

For most returning professionals the deferral is clearly the better outcome. But it is a decision that binds you for decades, and it should be taken with your overall position in view: when you intend to withdraw, whether you might move countries again, and how the withdrawal will be taxed when it happens.

What the Form Asks For

Form 10-EE is short but demanding. Beyond your name, PAN and the year, it asks for details of every specified account you hold, including:

• the account number, the name of the fund and the country
• the balance in the account as on the last day of the financial year before the year you are claiming for
• the exact date the account was opened, in day, month and year
• whether that country taxes the income on accrual or on receipt
• the year the money first becomes eligible for withdrawal
• the accretion in earlier years, split between amounts already taxed in India and amounts that were not taxable here because you were non-resident or RNOR at the time
• whether you filed Indian returns for those earlier years

That second-last item is the one that takes the most work. It requires you to establish your residential status for every year going back to when you opened the account, and to work out the growth in the account across those years.

The form also requires supporting documents: an account statement evidencing the account number, the country and the balance; and documentary proof of how that country taxes the income, usually the summary plan description or the plan document.

What You Will Need to Gather

Most of the work in a Section 89A claim is assembling the right statements. Four things are needed.

Statements for calendar year 2025, plus January to March 2026. Together these cover the full financial year for computing the year's income, and the calendar year portion is what goes into Schedule FA.

A statement as at 31 March 2025. This fixes the opening value for the deferral election. It is the balance at the end of the financial year before the year you are claiming for, which is the point most often got wrong.

Statements covering the period up to the end of your RNOR years. These establish the growth that accrued while you were non-resident or RNOR, which was never within the Indian tax net and has to be disclosed separately in the form.

The account number and the exact account opening date, if these are not printed on the statements themselves.

If you are not sure which years your RNOR period covers, you do not need to work it out yourself. Give us the number of days you were in India for the year you returned, the two financial years after, and the years before your return, and we will tell you exactly which statements are needed.

Two Things Section 89A Does Not Do

It does not remove your Schedule FA obligation. If you are ROR, your foreign retirement account has to be reported in Schedule FA of your return whether or not you claim the deferral. These are two separate requirements and one does not substitute for the other. Failure to report a foreign asset attracts a penalty of ten lakh rupees per year under section 43 of the Black Money Act, and that applies regardless of whether any tax was payable.

It does not fix earlier years. If you were already ROR in earlier years and the accretion went unreported, exercising the option now does not cure those years. That position needs to be examined separately, and often before the current year's return is filed rather than after.

What Usually Goes Wrong

In our experience the recurring errors are these.

Filing the form after the return instead of before it. Reporting the wrong balance, because the form asks for the closing balance of the preceding financial year and not the year you are filing for. Treating the first year of residence as the cut-off when the correct threshold is the first year of ROR status, which is typically two years later. Assuming that claiming Section 89A means Schedule FA is no longer needed. And filing the form without first establishing residential status year by year, which is the input the form actually runs on.

None of these are difficult to avoid. They are simply easy to miss if the form is treated as a formality.

Frequently Asked Questions

Do I have to pay Indian tax on my 401(k) if I have not withdrawn anything?

Once you are Resident and Ordinarily Resident, income accruing in the account, i.e. capital gain or dividend, can be taxable in India in the year it accrues, even though you have not withdrawn anything and the United States does not tax it until withdrawal.

Which accounts qualify?

Retirement accounts in the United States, the United Kingdom and Canada. In practice this covers 401(k), 401(a), 403(b), 457(b) and Traditional IRA accounts in the US; RRSP and RRIF in Canada; and SIPPs, workplace or occupational pension schemes and personal pensions in the UK. Accounts in other countries do not qualify, however similar they are.

I am RNOR at the moment. Do I need to do anything?

Not for Section 89A. During your RNOR years your foreign income is outside the Indian tax net, so there is nothing to defer. But keep your statements, because when you become ROR the form will ask you to quantify the growth that accrued during those RNOR years.

Can I file Form 10-EE after filing my return?

No. It must be filed before the return is uploaded, and by the due date under section 139(1). Filing it afterwards does not preserve the relief for that year.

Is the decision reversible?

No. Once exercised for a year, the option cannot be withdrawn for that year or any subsequent year. It stays with the account.

If I claim Section 89A, do I still need to report the account in Schedule FA?

Yes. They are separate requirements. Section 89A defers the tax; it does not remove the reporting obligation. Non-reporting of a foreign asset carries a penalty of ten lakh rupees per year under the Black Money Act, irrespective of whether any tax was due.

I have been ROR for a few years and never reported this account. What now?

Exercising the option now does not fix the earlier years. That position needs to be looked at on its own, and usually before the current year's return goes in rather than after. It is worth taking advice before filing.

Do I need to claim it for every account?

The declaration in the form states that the option has been exercised for all specified accounts. If you hold more than one, they should be dealt with together.

How We Can Help

We handle Section 89A claims for professionals who have returned to India from the United States, the United Kingdom and Canada, along with the wider foreign asset reporting that goes with them.

That work covers determining your residential status for each relevant year, reconstructing the accretion in your account across the years you were abroad, preparing and filing Form 10-EE with its supporting documents, and completing the Schedule FA disclosure and the return itself.

Balakrishna & Co. has over 37 years of experience in complex tax matters, including cross-border taxation, foreign asset reporting and scrutiny proceedings.

Balakrishna & Co., Chartered Accountants
No. 24, 3rd Floor, Above State Bank of India, 10th Cross, Wilson Garden, Bangalore 560027
Phone: +91 86182 59712
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

This article is for general information and reflects the law as it stands. It is not advice on any particular case. The position under Section 89A depends on the facts of your account, your residential status and the treaty position, and should be considered with reference to your own circumstances.