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

Rohit Menon, a resident in India, opened a retirement savings account in a country notified by the Central Government while he was a non-resident in India and a resident of that country. That country taxes the income of the account only when it is withdrawn or redeemed, not as it accrues. Under section 158 of the Income-tax Act, 2025, which statement is correct?

Rohit is a specified person with a specified account. He is resident in India now, opened the account while non-resident in India and resident in the notified country, and that country taxes only at withdrawal. His income is therefore taxed in the manner and tax year prescribed under section 158.

  1. ARohit is a 'specified person' and the account is a 'specified account', so the income is taxed in the manner and tax year prescribedCorrect
  2. BRohit is not a specified person because he is now resident in India, so the income is taxed on accrual every year
  3. CThe account is a specified account only if the notified country taxes the income on accrual
  4. DSection 158 applies only if Rohit opened the account while resident in India

Explanation

Section 158(2) defines a specified person as a resident in India who opened the account while non-resident in India and resident in the notified country. A specified account is a retirement benefit account in a notified country whose income is taxed there at withdrawal or redemption, not on accrual. Rohit meets both tests, so the income is taxed as prescribed. The option denying this ignores that the definition itself requires current Indian residence.

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