New Rule 21AAA: Income-tax (6th Amendment) Rules, 2022

The Central Board of Direct Taxes (CBDT) on March 26, 2021, has issued the Income-tax (6th Amendment) Rules, 2022 to further amend the Income-tax Rules, 1962. With this amendment, CBDT has notified Rule 21AAA and Form No. 10-EE to be filed by a person claiming relief under section 89A of the Income Tax Act. As per the Rule, if the income from foreign retirement funds is taxed at the time of redemption or withdrawal in the foreign jurisdiction, the assessee shall have the option to include such income in that relevant previous year (previous year in which withdrawal/redemption is made).

Section 89A of the Income Tax Act

CBDT has inserted a new section 89A vide the Finance Act, 2021 to provide relief to residents who have income from foreign retirement benefits accounts. Income from such foreign retirement benefits accounts is taxable in some countries on a receipt basis. However, the amount withdrawn from such an account is taxable in India on an accrual basis. Hence, the taxpayers are facing difficulties in claiming the foreign tax credit due to the mismatch in taxability for the particular year. Section 89A provides that the income of a specified person from the specified account shall be taxed in the manner and in the year as prescribed by the Central Government. A specified person means a resident person who opened a specified account in a notified country while being a non-resident and resident in that country. Exemptions on Retirement Benefits

CBDT notifies 4 Countries under section 89A of the Income-tax Act, 1961

Section 89A provides relief from taxation on income from a ‘retirement benefits account’ maintained in a notified country. The CBDT has notified ‘Canada’, ‘United Kingdom of Great Britain & Northern Ireland’, and ‘United States of America’ as notified countries for said Section. The official Notification of CBDT is as follows:

Rule 21AAA - Taxation of income from retirement benefits account maintained in a notified country

The Central Board of Direct Taxes (CBDT) has now notified Rule 21AAA- through the Income-tax (6th Amendment) Rules, 2022. This new Rule 21AAA prescribing manner for taxation of income from retirement benefits account maintained in a notified country. The rule provides that if a specified person has accrued any income in the retirement benefits account, then the same shall be included in his total income of the previous year, in which such income is taxed in the country wherein such account is maintained. For more details on Form 10E- Income Tax, click here

Form No. 10-EE

To exercise this option, the specified person is required to e-file Form No. 10-EE on or before furnishing return of income. Further, once this option is exercised, it will apply to all subsequent previous years and cannot be withdrawn. However, if the specified person has become a non-resident after exercising the option, then it shall be deemed that he has never exercised the option, and income accrued in the specified account from the previous year in which such option was exercised shall be taxable in his hand. The official notification of Income-tax (6th Amendment) Rules, 2022 and Form No. 10-EE is attached here for reference:

ITR Forms for the AY 2022-23 seek details of income from overseas retirement benefit accounts

The Central Board of Direct Taxes (CBDT) has recently notified forms ITR Forms for the AY 2022-23 or FY 2021-22. While largely the details remain the same as last year, there is fresh addition where taxpayers have to give details of income from overseas retirement benefit accounts from taxpayers. The ITR-1 form seeks details on income from retirement benefits accounts maintained in a foreign country for the calculation of net salary. It also seeks details on whether or not the said retirement benefits account was maintained in a notified country under section 89A of the Income Tax Act.

Income Tax E-Filing

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