Section 89A and the notified-country test for a foreign pension

Section 89A reads like a general relief for foreign retirement accounts, but it isn't. It applies only to an account maintained in a 'notified country' — one the Central Board of Direct Taxes has specifically listed.

The list is deliberately narrow: three countries — the United States of America, the United Kingdom of Great Britain and Northern Ireland, and Canada. That notification (No. 24/2022, dated 04.04.2022) is the same one that introduced Rule 21AAA and Form 10-EE — the machinery and the country list arrived together.

If your retirement account sits in one of those three, the Section 89A election is on the table. If it sits anywhere else, the section is simply unavailable — no Form 10-EE, no timing realignment. That single fact decides which of two quite different India treatments applies, which is why it is the first thing to check, not the last.

For a US 401(k) or IRA, a UK pension, or a Canadian retirement account, Section 89A is available. It lets a 'specified person' — a resident who opened the account while a non-resident of India and a resident of that country — elect to have India tax the account in the same year the foreign country does, rather than on yearly accrual.

The election is made by e-filing Form 10-EE before furnishing your return, and it is irrevocable. In practice the India-side work is: confirm your residential status and any RNOR window, confirm you qualify as a specified person, model whether aligning the timing actually helps you, file Form 10-EE if it does, then claim the foreign tax credit when the foreign country taxes the withdrawal.

The payoff is a clean match: India and the foreign country tax the same event in the same year, so the foreign tax credit lines up instead of being stranded in the wrong year.

This is where many readers actually sit — a Gulf gratuity or end-of-service benefit, a European occupational pension, an Australian superannuation fund, a Singapore CPF balance. None of these are in a notified country, so Section 89A and Form 10-EE are off the table.

India then taxes the account under its ordinary rules. Once you are an ordinary resident, the income arising in the account is generally taxable in India — and India's domestic rule leans to accrual, so growth inside the account can be taxed year by year even without a withdrawal. There is no Section 89A election to defer that to the receipt/withdrawal year.

The relief comes instead from the relevant Double Taxation Avoidance Agreement. Most of India's treaties have a pension article that allocates taxing rights — often giving the country of residence the right to tax private pensions — and a foreign tax credit for any tax the source country charged. So the right India treatment is: establish residential status and the RNOR window, read the specific treaty's pension article for your country, and apply the credit. There is no one-size answer, which is why the notified-country check has to come first.

Priya returns from London holding a UK workplace pension. Rakesh returns from Dubai holding a Gulf end-of-service gratuity. Both become Indian residents the same year, and both ask the same question: how does India tax my retirement money?

For Priya, the UK is a notified country. After mapping her RNOR window, her CA confirms she is a 'specified person' and models the Section 89A election. It helps, so they e-file Form 10-EE — India will now tax the pension in the year the UK does, and the foreign tax credit lines up.

For Rakesh, the Gulf country is not notified. Section 89A is unavailable — no Form 10-EE to file. Instead his CA maps his RNOR window (during which the foreign income is usually outside India's net), then, once he is an ordinary resident, applies India's ordinary rules to the gratuity and reads the relevant treaty's pension article to see how taxing rights and any credit fall.

Same question, different country, completely different India answer — and the notified-country check is what told them apart on day one.