Many Indians who worked abroad return home with retirement benefits—401(k) plans from the US, superannuation funds from Australia, pension funds from the UK, and more.
But here’s the problem: While the foreign country taxes the income at withdrawal, India used to tax it on accrual, even if the person hadn’t received a single rupee yet. This led to double taxation and serious cash flow issues.
That’s where Section 89A, introduced in the Finance Act, 2021, comes in. It offers relief to Indian residents receiving foreign retirement income by allowing taxation only at the time of withdrawal, aligning with the country of source.
Let’s understand how Section 89A works, who qualifies, and how to claim the benefit correctly.
✅ What Is Section 89A of the Income Tax Act?
Section 89A is a special provision for Indian residents who:
- Earn income from foreign retirement benefit accounts, and
- Face mismatch in the year of taxation between India and the foreign country
It allows the taxpayer to defer taxation in India and pay tax only in the year of actual withdrawal, aligning with the foreign country’s taxation schedule.
This solves the long-standing issue of double taxation, particularly for returning NRIS and global executives.
🌐 Countries Notified Under Section 89A
As of now, the Indian government has notified the following countries for Section 89A benefits:
- United States of America
- United Kingdom
- Canada
- Australia
- Netherlands
The list may expand as India enters into more bilateral agreements.
📋 Key Conditions to Claim Section 89A
To avail the benefit under Section 89A:
- You must be a resident taxpayer in India during the relevant financial year.
- The retirement account must be maintained in a notified country.
- The account must be recognised as a retirement benefit account under the laws of that foreign country.
- You must file Form 10EE online on the Income Tax Portal on or before the due date of filing the return under Section 139(1).
- You can opt for Section 89A only once for a specific account—this choice is irrevocable.
🧾 What Is Form 10EE?
Form 10EE is a declaration form you need to submit every financial year in which you want to defer taxation under Section 89A.
It includes:
- Details of the foreign retirement account
- The country where the account is held
- The year in which the income is accrued or withdrawn
- A declaration that the income is not taxable in the year of accrual
Failure to file Form 10EE invalidates your claim under Section 89A for that year.
💡 Example to Understand Section 89A
Let’s say:
- You are a returning NRI who moved back to India in FY 2023–24
- You have a 401(k) retirement account in the US, and
- It accrues $10,000 interest every year, but withdrawals (and US taxes) start only after age 60
Before 89A:
- India taxed you on accrued income, even if you didn’t withdraw it
- US taxed you again at the time of withdrawal
- Result: Double taxation
After opting for 89A and filing Form 10EE:
- India will tax you only in the year of withdrawal, just like the US
- You can use DTAA provisions to avoid tax again
🧠 People Also Ask
❓ Can NRIs claim Section 89A?
No. Section 89A is applicable only to residents in India. NRIs are not eligible.
❓ Is Form 10EE mandatory every year?
Yes. You must file Form 10EE for each year you want to defer taxation. Without it, the benefit of 89A is not granted for that year.
❓ Can I opt out of Section 89A later?
No. Once opted for a particular retirement account, the choice under Section 89A is irrevocable.
❓ Is pension from India also covered?
No. This section is only for retirement accounts held in notified foreign countries.
⚠️ Common Mistakes to Avoid
- Forgetting to file Form 10EE before the ITR due date
- Trying to apply 89A to Indian pensions or unnotified countries
- Declaring the income in ITR without selecting the proper option
- Opting for 89A without understanding its permanent nature
📌 Where to Report in ITR
- Report the foreign retirement income in Schedule FA (Foreign Assets)
- Mention income in Schedule CG or Schedule OS, as applicable
- Ensure Form 10EE has been filed before ITR submission
- If you opt for Section 89A, don’t include accrued income in that year’s taxable income
🎯 Final Thoughts from a CA’s Desk
“Section 89A is a well-deserved relief for returning Indians—but only if claimed with full compliance.”
This provision is powerful but technical. Missing even one form or reporting it incorrectly can lead to loss of benefit or tax notices. If you have foreign retirement accounts and are now tax-resident in India, consult before filing.
📞 Need Help Claiming Section 89A or Filing Form 10EE?
At CallmyCA, we help:
- Determine eligibility for Section 89A
- File Form 10EE correctly and on time
- Declare foreign retirement income as per Indian tax laws
- Avoid double taxation and legal hassles
👉 Click here to book your foreign income tax filing support via CallmyCA
