Section 89A of the Income Tax Act: Relief on Foreign Retirement Accounts

Last updated: Oct 2026

Section 89A fixes a timing mismatch. India taxes the yearly growth in a foreign retirement account, but the country that holds it taxes only when you withdraw.

• Who: a resident of India who opened the account in the USA, UK or Canada while a non-resident
• Accounts: retirement accounts such as a 401(k), an Individual Retirement Account (IRA), a Registered Retirement Savings Plan (RRSP) or a UK pension
• Form: Form 10-EE before your return, and Form 40 under the Income-tax Act, 2025
• Effect: tax moves to the year of withdrawal, so it is deferred, not waived
• Example: Rs. 6 lakh of growth would cost Rs. 1,87,200 in the 30% slab with no cash in hand

Opt in only after you check the account type. The option cannot be withdrawn for that year or later ones.

Section 89A is the provision that relieves a returning Indian from paying tax every year on growth inside a foreign retirement account. The Finance Act, 2021 inserted it, and it applies from assessment year (AY) 2022-23.

The problem it solves is timing. A country such as the USA taxes retirement income when you withdraw it. India, for a resident, taxes the income as it accrues. Without relief, you pay Indian tax on money you cannot spend. Rule 21AAA and Form 10-EE put the section into practice.

You can claim it if you are a resident of India who opened the account while you were a non-resident. The law calls this person a specified person.

The Central Board of Direct Taxes notified the 3 countries through Notification 25/2022 of 4 April 2022.

Only retirement benefit accounts in the 3 notified countries qualify. A brokerage account or a savings account does not.

The test is how the country taxes the account: income must be taxed on withdrawal, not on accrual. A Roth IRA is contested, because relief depends on the country taxing the withdrawal. Ask a tax professional about any account that is not on this list. One live page lists Australia as well, but the notification names 3 countries.

The income that accrues each year stays out of your Indian total income. It enters your Indian total income in the year the notified country taxes it.

Formula used: Tax in the withdrawal year = slab tax on (income accrued in earlier years + other income of that year). Credit for foreign tax paid is claimed separately.

This is deferral. You still pay tax later, and you claim a foreign tax credit for tax paid abroad, as the guide to Form 67 and foreign tax credit explains.

You opt in by filing a form before your return, and the form changed with the new Act. Five steps cover it.

1. Confirm that you are a specified person and that the account is a specified account.
2. For income up to AY 2026-27, file Form 10-EE on the e-filing portal on or before the due date under Section 139(1).
3. Enter the notified country and the account details.
4. Then file your return, leaving the accrued income out.

5. Keep the account statements for the year of withdrawal.

   
   

Under the Income Tax Act, 2025, from Tax Year 2026-27, the relief sits in Section 158 with Rule 74, and Form 40 replaces Form 10-EE.

Consider Sneha, a 40-year-old marketing head who returned from Toronto to Mumbai, with a household income of Rs. 3 lakh a month and a CIBIL Score of 771. Her Registered Retirement Savings Plan grew by an assumed Rs. 2 lakh a year, and she is in the 30% slab.

Sneha saves Rs. 1,87,200 of cash tax in the 3 years, and she plans the withdrawal year so that she does not push the whole gain into one high slab.

Bajaj Finance does not offer home loans to Non-Resident Indians (NRIs). Applicants must be Indian citizens residing in India. A returning Indian who resides in India applies as a resident, subject to credit assessment.

Approval timelines can extend where residence status and income documents need clarification, and minimum income thresholds can differ by city. Check your home loan eligibility once you are resident and your returns are filed.