Chapter IX - Rebates and Reliefs
Section 158
Section 158: relief on income from a foreign retirement benefit account
Section 158 addresses a specific mismatch problem: a person who worked abroad and built up retirement savings there may find that country taxes the account only on withdrawal, while India would otherwise tax it as it accrues. This section lets the income accrued in such a "specified account" in a "notified country" be taxed in the manner and tax year that is prescribed, rather than automatically on accrual.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The income accrued to a specified person in a specified account shall be taxed in such manner and in such tax year, as may be prescribed.
(2) For the purposes of this section,— (a) “notified country” means a country as may be notified by the Central Government; (b) “specified account” means an account maintained in a notified country by the specified person for his retirement benefits, the income from 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.
Introduction
Section 158 addresses timing mismatches for foreign retirement accounts: India may otherwise tax accrued income before the notified country taxes withdrawal. It delegates the tax manner and year to prescribed rules for qualifying persons and accounts.
Key takeaways
Foreign retirement account
Income accruing in a qualifying retirement-benefit account held in a notified country by a specified person is taxed in the manner and tax year prescribed under this section.
Who qualifies
The account holder must now be resident in India but have opened the account while non-resident in India and resident in the notified country; that country taxes the account on withdrawal or redemption rather than accrual.
The relief
The income accrued to a specified person in a specified account is taxed in such manner and in such tax year, as may be prescribed.
Key definitions
| Term | Meaning |
|---|---|
| Notified country | A country notified as such by the Central Government |
| Specified account | An account maintained in a notified country by the specified person for retirement benefits, where the income from it is taxed by that notified country at the time of withdrawal or redemption, and not on accrual basis |
| Specified person | 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 |
Three qualification tests
Establish that the country is notified, the account is for retirement benefits and taxed there on withdrawal or redemption, and the current Indian resident opened it while non-resident in India and resident in that country.
Step-by-step flow for applying Section 158
- 1
Is the account maintained in a country notified by the Central Government?
- No: Section 158 does not apply.
- Yes: Go to the next step.
- 2
Is the account for retirement benefits, with income taxed by that country on withdrawal or redemption and not on accrual?
- No: Not a specified account.
- Yes: Go to the next step.
- 3
Is the account holder now resident in India, and did they open the account while non-resident in India and resident in that country?
- No: Not a specified person.
- Yes: Go to the next step.
- 4
Tax the accrued income in the manner and tax year prescribed
The section leaves both the manner and the year to the rules.
Practical checklist
Do
- Keep foreign residence history, account-opening records and evidence of that country's tax timing.
- Verify the country's notification and prescribed method for the relevant tax year.
Avoid
- Do not assume every overseas retirement account is a specified account.
- Do not infer the tax year from Section 158 alone; it expressly depends on prescribed rules.
Illustrative example
Illustration: a returning resident's foreign retirement account
Hypothetical facts (illustration only, not a real taxpayer): Mr. Sharma worked abroad for many years, was non-resident in India and resident in Country X, and opened a retirement account there. Country X taxes that account's income only on withdrawal. He has since returned and is resident in India. Assume Country X is notified under Section 158. His brother opened a similar account in Country X after becoming resident in India.
Notified country
Country X is assumed to be notified.
Specified account
Mr. Sharma's account is for retirement benefits and taxed in Country X on withdrawal, not accrual.
Specified person
He is resident in India and opened the account while non-resident in India and resident in Country X.
Brother's account
He opened his account while resident in India, so he is not a specified person.
Outcome
- Income accruing in Mr. Sharma's account is taxed in the manner and tax year prescribed under Section 158.
- His brother's account falls outside Section 158.
Glossary
- Specified account
- A notified-country retirement account meeting subsection (2)(b)'s tax-timing condition.
- Specified person
- A current Indian resident who opened the qualifying account while non-resident in India and resident in the notified country.
Frequently asked questions
Who can use the Section 158 relief?
A "specified person" - someone resident in India who opened a retirement account in a notified country while they were non-resident in India and resident in that country.
Why does this relief exist?
Because a notified country's retirement account may tax income only on withdrawal or redemption rather than as it accrues, so this section allows the same account's income to be taxed in India in the manner and tax year prescribed, rather than by default on accrual.
Does the section itself specify the tax year or manner of taxation?
No - the section states that the income is taxed "in such manner and in such tax year, as may be prescribed", leaving the specifics to be prescribed separately.
Need help applying this provision to your situation?
Talk to our team about foreign retirement account tax reliefLast updated 9 October 2026