Relief from taxation in income from retirement benefit account maintained in a notified country
[Section-158 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 158(1) of Income Tax Act 2025
158(1) The income accrued in a specified account, maintained in a notified country by a specified person, shall be taxed in a tax year, as prescribed.
Section 158(2) of Income Tax Act 2025
158(2) In this section,—
- (a) “notified country” means a country as notified by the Central Government;
- (b) “specified account” means an account maintained in a notified country by the specified person for his retirement benefits, which is taxed by that notified country at the time of withdrawal or redemption and, not on accrual basis;
- (c) “specified person” means a person resident in India having opened a specified account in a notified country while being non-resident in India and resident in that country.
FAQs on Section 158 of Income Tax Act 2025
What is the objective of Section 158 of the Income Tax Act, 2025?
Section 158 provides relief from taxation on income accrued in retirement benefit accounts maintained in notified countries by allowing taxation in India to align with the tax treatment of the foreign country, i.e., at withdrawal/redemption rather than on accrual.
Who is considered a specified person under this section?
A specified person is a resident of India who had opened a retirement benefit account in a notified country during the period when they were non-resident in India and resident in that notified country.
What is a specified account?
A specified account is a retirement benefit account maintained in a notified country, which is taxed by that country at the time of withdrawal or redemption and not on an accrual basis.
What is a notified country?
A notified country is one that is officially notified by the Central Government for the purpose of this provision.
When is the income from a specified account taxed in India?
The income is taxed in India in the year it is withdrawn or redeemed from the specified account, as prescribed, and not in the year it accrues.
Does Section 158 provide exemption from taxation altogether?
No, it does not exempt the income but defers taxation in India to the time of withdrawal or redemption, in line with the tax treatment in the notified country.
Is this provision applicable retrospectively?
No, it is applicable from the tax year starting on or after 1st April, 2026.
Will the relief be available if the account is in a country not notified by the Central Government?
No, the relief under Section 158 applies only to accounts maintained in countries that have been notified by the Central Government.
What happens if the specified person becomes non-resident again after becoming resident?
The applicability of Section 158 is based on the person being a resident in India at the time of taxation. Further guidance may be prescribed under the rules.
What kind of retirement accounts may qualify as specified accounts?
Any retirement benefit account that meets the conditions under clause (b) of Section 158(2), including taxation at withdrawal in the notified country, may qualify. The specific types may be clarified in notifications or rules.
Will income from employer contributions to the specified account also be covered under this relief?
Yes, if such income accrues in the specified account and the account meets the defined conditions, the income will be taxed in the year of withdrawal.
Are there any prescribed forms or declarations required to avail this relief?
The exact procedural requirements such as forms, declarations, or documentation may be prescribed in the rules framed under the Act.
Does this provision apply to both lump sum withdrawals and periodic pension payments?
Yes, to the extent such withdrawals or payments are from a specified account and meet the prescribed conditions, the provision would apply.
What if the specified account earns income from capital gains or interest?
Such income will also be included under this provision, provided it accrues in the specified account and is taxed in the notified country only at withdrawal.
Is the benefit available to both citizens and non-citizens of India who are now residents?
Yes, as long as the person meets the definition of a specified person, i.e., resident in India now, but had opened the account while being non-resident and resident in the notified country.
Is any reporting of the specified account required in the Indian income tax return?
Yes, specified foreign assets, including such accounts, may still need to be reported as per applicable rules even if taxation is deferred.
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