Addressing mismatch in taxation of income from notified overseas retirement fund

Budget 2021-22 + FINANCE Bill, 2021

Addressing mismatch in taxation of income from notified overseas retirement fund

Representations have been received that there is mismatch in the year of taxability of withdrawal from retirement funds by residents who had opened such fund when they were non-resident in India and resident in foreign countries. At present the withdrawal from such funds may be taxed on receipt basis in such foreign countries, while on accrual basis in India. In order to address this mismatch and remove this genuine hardship, it is proposed to insert a new section 89A to the Act to provide that the income of a specified person from specified account shall be taxed in the manner and in the year as prescribed by the Central Government. It is also proposed to define the expression “specified person”, as a person resident in India who opened a specified account in a notified country while being non-resident in India and resident in that country. “Specified account” is proposed to be defined as an account maintained in a notified country which is maintained for retirement benefits and the income from such account is not taxable on accrual basis and is taxed by such country at the time of withdrawal or redemption. “Notified country” is proposed to be defined to mean a country notified by the Central Government for the purposes of this section in the Official Gazette.

This amendment will take effect from 1st April, 2022 and will accordingly apply to the assessment year 2022-23 and subsequent assessment years.

[Clause 28]

Full Text:

Budget 2021-22 + FINANCE Bill, 2021

Dated: 1-2-2021