The Income Tax Department has issued a comprehensive set of Frequently Asked Questions (FAQs) on Form 40, providing much-needed clarity on the procedure for claiming relief in respect of foreign retirement benefit accounts under the Income Tax Act, 2025.
The guidance is particularly relevant for returning Indians, expatriates, and individuals who have accumulated retirement savings in countries such as the United States, United Kingdom, Canada or Australia before becoming residents of India.
What is Form 40?
Form 40 is the prescribed form through which a resident taxpayer can exercise the option to claim relief under Section 158 of the Income Tax Act, 2025.
The provision seeks to address a common issue faced by taxpayers who maintain retirement benefit accounts abroad. In many countries, income earned in such accounts is taxed only at the time of withdrawal or redemption. However, under Indian tax principles, the same income may become taxable on an accrual basis after the individual becomes a resident of India.
By filing Form 40, eligible taxpayers can defer taxation in India until the income is actually withdrawn or redeemed in the notified foreign country.
Who Can File Form 40?
The FAQs clarify that Form 40 may be filed by a "specified person", namely an individual who:
- Is currently a resident in India;
- Had opened the retirement benefit account while being a resident of a notified foreign country; and
- Was a non-resident in India at the time the account was opened.
The relief currently applies to retirement benefit accounts maintained in notified countries including:
- United States of America (USA)
- United Kingdom (UK)
- Canada
- Australia
Is Filing Form 40 Mandatory?
Yes. The Income Tax Department has clarified that filing a valid Form 40 within the prescribed time limit is a mandatory requirement for claiming relief under Section 158.
Failure to submit the form may result in the taxpayer being unable to avail the tax deferral benefit available under the provision.
Does the Option Need to be Exercised Every Year?
No. Once the option is exercised through Form 40, it remains applicable for that tax year and continues to apply in subsequent years as well.
The FAQs further clarify that the option cannot be revoked for the tax year in which it is exercised.
What Details Need to be Furnished in Form 40?
Taxpayers are required to provide details relating to all eligible retirement accounts maintained in the notified country, including:
- Account number
- Date of opening
- Name of retirement fund
- Country where the account is maintained
- Account balance at the end of the relevant tax year
- Details of income previously taxed in India, if any
The taxpayer must also make a self-declaration confirming that the option is being exercised for all eligible retirement benefit accounts maintained in the notified country.
What Documents Must Be Attached?
The FAQs prescribe several supporting documents that must accompany Form 40, including:
1. Account Statement (Annexure A1)
A copy of the retirement account statement showing:
- Account number
- Notified country
- Account balance as on the last date of the financial year
2. Evidence of Foreign Tax Treatment (Annexure A2)
Documents demonstrating how the income from the retirement account is taxed or taxable in the foreign country, such as:
- Relevant statutory provisions
- Tax guidance
- Official documentation
3. Computation and Reconciliation Statement (Annexure A3)
Taxpayers must furnish:
- Computation of income for years in which such income was already offered to tax in India;
- Reconciliation with income-tax returns filed for those years.
How and Where Should Form 40 Be Filed?
The form can be filed only through the Income Tax Department's e-filing portal.
The filing must be completed electronically using either:
- Digital Signature Certificate (DSC), or
- Electronic Verification Code (EVC).
Offline filing is not permitted.
What is the Due Date for Filing Form 40?
The FAQs state that Form 40 must be furnished on or before the due date applicable for filing the income tax return under Section 263(1)(c) of the Income Tax Act, 2025.
Taxpayers intending to claim relief should therefore ensure that the form is submitted before the applicable return filing deadline.
Can Form 40 Be Revised or Edited After Submission?
No. Once Form 40 has been successfully submitted and an acknowledgment has been generated, the form cannot be edited or revised. Taxpayers are therefore advised to verify all details carefully before final submission.
Is PAN Mandatory?
Yes. The Department has categorically clarified that Form 40 cannot be filed without a valid Permanent Account Number (PAN). PAN is a mandatory field and the form will not be accepted in its absence.
Why is Form 40 Important?
The introduction of Form 40 operationalises the relief mechanism contained in Section 158 of the Income Tax Act, 2025 and provides certainty to taxpayers who have accumulated retirement savings overseas.
Without this relief, taxpayers could potentially face timing mismatches and double taxation concerns arising from differences between Indian tax laws and foreign taxation systems.
The FAQs now provide a clearer compliance roadmap by explaining eligibility conditions, filing requirements, supporting documentation, and procedural aspects of claiming the benefit.
For returning Indians and global professionals relocating to India, timely filing of Form 40 could play a crucial role in ensuring efficient tax treatment of foreign retirement savings and avoiding unnecessary tax disputes in the future.
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