If you are an Indian citizen returning home, then you must be aware of the section 89A of income tax act. If you aren’t, then let me help you understand that. Section 89A was introduced in 2021 within the Income Tax Act of 1961. This section was mainly introduced to address the issue of double taxation for returning residents. So, how does section 89A work?
What is Section 89A of Income Tax Act and How It Works?
As I mentioned above, Section 89A was introduced to address double taxation for returning residents. What is this double taxation? In India, income is taxed on an accrual basis. This means that people can be taxed on income earned in foreign retirement accounts even if they didn’t withdraw the money.
Here’s how Section 89A works.
Specified Accounts & Countries
Only income from retirement accounts maintained in countries notified by the Indian government qualifies for relief under Section 89A. These countries are the US, Canada, and the UK.
Retirement account itself must also be a "specified account," which typically refers to government-sponsored or employer-sponsored retirement plans like 401(k)s and IRAs.
Tax Deferral
After opting for this section, the income generated within these specified accounts is not included in the taxable income in India for each year. This defers any tax liability until the funds are withdrawn from the account in the foreign country.
And that’s what the Section 89A of ITR is all about. I hope this helps.
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What is Section 89A of Income Tax Act?
Resma
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2024-10-28T19:47:09+00:00 2024-10-28T19:47:10+00:00Comment
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