Resettled in India? Here's how Form 40 can help defer tax on overseas retirement savings until withdrawal

NRIs who returned to India and became tax residents but continue to hold retirement savings accounts in countries such as the US, UK, Canada or Australia are eligible to defer tax on interest accruing in those accounts until the money is actually withdrawn. To avail this relief under the Income Tax Act, 2025, taxpayers are required to file Form 40.

Form 40 replaces Form 10EE, though the rules or features of the provision remain the same. It seeks to address a tax timing mismatch that can arise when a person becomes a tax resident of India while continuing to maintain retirement savings in other foreign countries.

Taxpayers must also note that this tax relief is available only to those with retirement savings accounts in the notified countries mentioned above. These may include retirement schemes such as US 401(k) plans, IRAs, pension schemes in the UK and eligible retirement savings plans in Canada.

What is Form 40 and is it mandatory?

Form 40 allows Indian residents with retirement accounts in notified countries to opt for tax deferral. By filing the form, eligible taxpayers can avoid paying tax in India on income accruing in these accounts each year.

“It is important to note that Form 40 does not provide a tax exemption. It merely postpones the Indian tax liability to a later point. When funds are eventually withdrawn, the amount may be taxable in India, subject to applicable provisions and treaty benefits. At the same time, the foreign country may also levy tax on the withdrawal. In such cases, taxpayers would generally need to rely on the relevant tax treaty and foreign tax credit mechanisms to avoid double taxation,” said Gaurav Makhijani, Managing Partner at MGA.

The option, once exercised, cannot be revoked for that tax year and applies to all subsequent tax years. The option has to be exercised by the resident person for all such retirement benefit accounts maintained in the notified country.

Where is Form 40 required to be filed?

Individuals can file the Form 40 electronically on the e-filing portal of the Income Tax Department. It can be furnished by using either a digital signature certificate or an electronic verification code and must be verified by the eligible taxpayer.

Once Form 40 is submitted along with a self-declaration by the individual, and an acknowledgement is generated, it cannot be edited. People must also note that there is no offline route to file Form 40.

What documents are required to file Form 40?

The following set of documents may be required while filing Form 40:

• Specified account or foreign retirement account details, such as account number, date of account opening, and account balance at the end of the previous tax year.
• Name of the retirement fund and the notified country.
• Details of income already taxed in India in earlier years, if any.
• Copy of the statement of the specified account having the above details.
• Document showing how the income from the specified account has been taxed or is taxable in the notified country.

What is the due date for filing Form 40?

Form 40 must be filed electronically on or before the due date for filing the income tax return applicable to the taxpayer under the Income-tax Act, 2025.

Filing the form within the prescribed deadline is essential for claiming the tax relief available under Section 158. “Failure to file Form 40 within the prescribed timeline could result in the taxpayer losing the benefit of tax deferral for that year," Makhijani said.