Section 89A
Relief to NRI From Double Tax on Foreign Retirement Corpus 

What is Section 89A

CBDT has inserted a new section 89A vide the Finance Act, 2021 which is effective from assessment year 2022-23. To provide relief to residents who have income from foreign retirement benefits accounts.

Income from such foreign retirement benefits accounts is taxable in some countries on a receipt basis. However, the amount withdrawn from such an account is taxable in India on an accrual basis. Hence, the taxpayers are facing difficulties in claiming the foreign tax credit due to the mismatch in taxability for the particular year.

Section 89A provides that the income of a specified person from the specified account shall be taxed in the manner and in the year as prescribed by the Central Government. A specified person means a resident person who opened a specified account in a notified country while being a non-resident and resident in that country.

Persons Covered

A person resident in India who opened an account in respect of his retirement benefit in any notified country while being non-resident in India and resident of such country.

Income Covered

The income accruing in such retirement benefit account which is not taxable on accrual basis, but it is taxed by such country at the time of withdrawal or redemption.

Countries Notified for section 89A

Vide Notification No 25/2022 dated 4th April 2022, the Central Government has notified following countries as a “Notified Country” for the purpose of this section namely

• Canada
• United Kingdom of Great Britain and Northern Ireland
• United State of America
  

New Rule 21AAA Income-tax (6th Amendment) Rules, 2022

The Central Board of Direct Taxes (CBDT) on March 26, 2021, has issued the Income-tax (6th Amendment) Rules, 2022 to further amend the Income-tax Rules, 1962. With this amendment, CBDT has notified Rule 21AAA and Form No. 10-EE to be filed by a person claiming relief under section 89A of the Income Tax Act. 

As per the Rule, if the income from foreign retirement funds is taxed at the time of redemption or withdrawal in the foreign jurisdiction, the assessee shall have the option to include such income in that relevant previous year (previous year in which withdrawal/redemption is made).

Form No. 10EE

To exercise this option, the specified person is required to e-file Form No. 10-EE on or before furnishing return of income. Further, once this option is exercised, it will apply to all subsequent previous years and cannot be withdrawn.

ITR Forms for the AY 2022-23 seek details of income from overseas retirement benefit accounts

The Central Board of Direct Taxes (CBDT) has recently notified forms ITR Forms for the AY 2022-23 or FY 2021-22. While largely the details remain the same as last year, there is fresh addition where taxpayers have to give details of income from overseas retirement benefit accounts from taxpayers.

The ITR-1 form seeks details on income from retirement benefits accounts maintained in a foreign country for the calculation of net salary. It also seeks details on whether or not the said retirement benefits account was maintained in a notified country under section 89A of the Income Tax Act.

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