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CA Final · Direct Tax Laws & International Taxation · Non Resident Taxation

Meera, a resident in India, opened a pension account in a foreign country while she was non-resident in India and resident in that country. That country has been notified by the Central Government. The account's income is taxed by that country only at the time of withdrawal and not on accrual. Under section 158 of the Income-tax Act, 2025, how is the income accruing in this account taxed in India?

The income is taxed in the manner and in the tax year that may be prescribed. Meera is a specified person holding a specified account in a notified country, and section 158(1) leaves the timing and method of taxation to the rules rather than taxing on accrual or exempting it.

  1. AIn such manner and in such tax year as may be prescribedCorrect
  2. BOn accrual basis every year, without exception
  3. COnly in the year the account was opened
  4. DIt is fully exempt and never taxed in India

Explanation

Meera is a 'specified person' because she is resident in India and opened the account while non-resident in India and resident in the notified country. The account is a 'specified account' because it is a retirement benefit account taxed abroad at withdrawal, not on accrual. Section 158(1) says such income is taxed in the manner and tax year prescribed. Taxing it on accrual, or exempting it, is not what the section provides.

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