Section 158 of the Income-tax Act, 2025 — Relief on Income from Foreign Retirement Benefit Accounts in Notified Countries

In plain language

What Section 158 actually deals with

Important clarification first. Section 158 of the Income-tax Act, 2025 does not deal with the general Double Taxation Avoidance Agreement (DTAA) relief that most people mean when they say "double taxation relief for notified countries." Its actual heading is "Relief from taxation in income from retirement benefit account maintained in a notified country." It is the direct successor to Section 89A of the old Income-tax Act, 1961 (which was inserted by the Finance Act, 2021). The broad DTAA/treaty relief provisions live separately in Sections 159 and 160 of the 2025 Act.

So Section 158 is a narrow but very useful provision for one specific group: Indians who worked abroad, opened a retirement account there (like a US 401(k) or IRA, a UK pension, or a Canadian RRSP), and later became resident in India.

The problem it solves — a timing mismatch

• How the foreign country taxes it: Countries like the USA, UK and Canada usually tax these retirement accounts only at the time of withdrawal or redemption (receipt basis).
• How India taxes it (without relief): Under Indian law, a resident is taxed on global income on an accrual basis — meaning the year-on-year growth (interest, dividends, capital appreciation) inside the foreign account could be taxed in India every year, even though you have not touched a single rupee.
• The double-tax trap: India taxes the growth as it accrues; the foreign country taxes the whole amount later on withdrawal. Same income, taxed twice, in different years — with mismatched foreign tax credit. Section 158 fixes this.

What relief Section 158 gives

Deferral, not exemption. If you opt in, the income accruing in your specified foreign retirement account is not taxed in India year-on-year. Instead, it becomes taxable "in such manner and in such tax year as may be prescribed" — effectively when it is taxed in the notified country (on withdrawal/redemption). This aligns the Indian tax point with the foreign tax point so you can properly claim foreign tax credit and avoid genuine double taxation.

Who it applies to — key definitions

• Specified person: A person resident in India who opened the account in a notified country while he was a non-resident in India and resident in that country. (So it targets returning NRIs, not someone who opened a foreign account while already living in India.)
• Specified account: An account maintained in a notified country for retirement benefits, the income of which is taxed by that country at the time of withdrawal or redemption, not on accrual.
• Notified country: A country notified by the Central Government. Under the predecessor Section 89A, the CBDT notified the USA, UK and Canada (Northern Ireland covered within the UK notification; some sources also mention Australia). Always check the latest notification for the current list.

Conditions and how to claim

• You must exercise an option — the relief is not automatic. Under the old law this was Form 10-EE with Rule 21AAA; under the Income-tax Act, 2025 and the Income-tax Rules, 2026 the corresponding form is reported to be Form 40.
• File before the ITR due date. The option must be exercised on or before the due date for filing your return for the relevant year.
• One-way door: Once exercised, the option applies to all subsequent years and generally cannot be withdrawn.
• Account must be in a notified country and must satisfy the "specified account" test above.

How it interacts with other sections

• Sections 159 & 160 (DTAA relief): These handle treaty-based (bilateral) and unilateral relief — the successors to Sections 90/90A/91 of the 1961 Act. Section 158 is separate and deals only with the timing of taxing retirement accounts.
• Foreign Tax Credit: By deferring Indian tax to match the foreign taxing point, Section 158 makes it far easier to claim FTC when you finally withdraw, avoiding a credit mismatch.
• Schedule FA (foreign assets): Opting for Section 158 does not remove your duty to disclose the foreign account in your ITR foreign-assets schedule.

Practical implications

For a returning NRI with a large 401(k) or RRSP, Section 158 can save real money and paperwork — you avoid paying Indian tax every year on unrealised growth and avoid a messy FTC claim later. The trade-off is that the deferred income eventually gets taxed in India in the year prescribed, so it is a timing benefit that aligns both countries' tax points, not a permanent exemption.