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

Mr. Raman, a resident in India, opened a retirement benefit account in a notified country while he was non-resident in India and resident in that country. That country taxes the account only on withdrawal or redemption and not on accrual. Under the Income-tax Act, 2025, how is the income accruing in this account taxed in India?

The income accrued in the specified retirement account is taxed in such manner and in such tax year as may be prescribed. Section 158 gives relief to a resident who opened the account in a notified country as a non-resident, so taxation is not simply on accrual.

  1. AIt is taxed in India every year on accrual, in the same way as any other foreign income of a resident
  2. BIt is taxed in such manner and in such tax year as may be prescribedCorrect
  3. CIt is fully exempt in India, whether or not it is later withdrawn
  4. DIt is taxed only if Raman becomes non-resident again

Explanation

Section 158 provides relief for a specified person holding a specified account in a notified country. The income accrued in the account is taxed in such manner and in such tax year as may be prescribed. It is therefore neither taxed on accrual by default nor given a blanket exemption.

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