Tax relief on USA Retirement Benefit Account - u/s 89A r.w.s rule 21AAA

[PRIYAM KHAMBHATA]

Respected Sir

My client is citizen of USA since long, but his residential status became Resident of India, from AY 2019-20. He is maintaining Foreign Retirement Benefit Account - 401K account, IRA Account. As per the new provisions inserted from 01.04.2022 in respect of Tax Relief u/s. 89A read with rule 21AAA, he has to exercise option, foreign income reporting at the time of receipt, not at the time of accrued and to file Form 10EE online. But, my client has missed out file Form 10EE from AY 2023-24 and not to report foreign income on such foreign retirement benefit accounts in the Return of Income filed for AY 2022-23 to 2024-25.

Now, what are the consequences arise, if he file Form 10EE as per the rule 21AAA for the AY 2025-26, or otherwise he will not file Form 10EE and Foreign Income will report in ITR when he receives.

Should he report foreign retirement accounts in Foreign Asset Disclosure - Schedule FA in ITR ?

Please guide me.

Thanks

[Ryan Vaz]

Since your client is a Resident of India, his global income, including accrued income from foreign retirement accounts, is taxable in India on an accrual basis by default. The option under Section 89A to tax such income on a receipt basis is available only if Form 10EE is filed before the due date of filing the Income Tax Return for the relevant assessment year. As Form 10EE was not filed for AY 2022-23, 2023-24, and 2024-25, the accrued income from these accounts for those years should have been reported and taxed. For AY 2025-26, he can still file Form 10EE by the ITR due date to opt for receipt-based taxation. Regardless of the taxation method, all foreign retirement accounts must be reported in Schedule FA of the ITR.

AI Summary

Foreign retirement accounts: receipt-based taxation under section 89A depends on timely Form 10EE filing and Schedule FA disclosure.
Resident individuals holding foreign retirement benefit accounts such as 401K or IRA are generally taxed in India on an accrual basis as part of global income. The relief under section 89A read with rule 21AAA allows receipt-based taxation only if Form 10EE is filed online before the due date of return filing for the relevant assessment year. If the form is not filed within time for earlier years, the accrued income for those years remains reportable on accrual basis. Foreign retirement accounts must also be disclosed in Schedule FA.