Introduction

The Central Board of Direct Taxes (CBDT) has prescribed Form No. 10-EE under Rule 21AAA of the Income-tax Rules, 1962 for taxpayers exercising the option to claim relief under Section 89A of the Income-tax Act, 1961. This provision allows eligible individuals to defer taxation on income arising from foreign retirement benefit accounts maintained in notified countries until the year of withdrawal or redemption. For the assessment year 2026–27, taxpayers required to file their return of income on or before August 31, 2026 must furnish this statement electronically.

Understanding Section 89A

Section 89A was introduced by the Finance Act, 2021 to address the mismatch in taxation between India and certain foreign jurisdictions. Normally, India taxes global income on an accrual basis, while countries like the United States, United Kingdom, and Canada tax retirement benefits only upon withdrawal. This mismatch often leads to double taxation or timing issues for returning NRIs.

Under Section 89A:

·         Eligible taxpayers can elect to defer Indian taxation on income from foreign retirement accounts until the year it becomes taxable in the source country.

·         The election is made by filing Form No. 10-EE before the due date under Section 139(1).

·         Once exercised, the option cannot be withdrawn.

Key Compliance Requirements

·         Applicable Form: Form No. 10-EE (as per Rule 21AAA)

·         Eligible Accounts: Retirement benefit accounts maintained in notified countries — USA, UK, and Canada (as per CBDT Notification No. 25/2022 dated 4 April 2022)

·         Eligible Persons: Resident individuals who opened the account while they were non-residents of India

·         Deadline: On or before the due date for filing the income tax return (August 31, 2026 for AY 2026–27)

·         Mode of Filing: Electronically through the e-Filing portal

·         Irrevocability: Once opted, the election cannot be revoked in subsequent years

Practical Implications

Filing Form 10-EE ensures:

·         Alignment of tax timing between India and the foreign jurisdiction

·         Avoidance of double taxation on deferred retirement income

·         Simplified foreign tax credit claims under the Double Taxation Avoidance Agreement (DTAA)

Failure to file Form 10-EE may result in:

·         Taxation of accrued income annually in India

·         Loss of relief under Section 89A

·         Potential double taxation on the same income

Conclusion

Taxpayers with foreign retirement accounts in the USA, UK, or Canada should carefully review their eligibility and ensure timely submission of Form No. 10-EE before August 31, 2026. This compliance step is crucial to avail relief under Section 89A and maintain parity with foreign tax treatment