ITR-1, 4 removed for US 401(k) reporting
The recently announced new income tax return (ITR) forms have removed the fields seeking reporting of foreign retirement accounts from the ITR-1 and ITR-2 forms. These updated ITR forms apply to AY 2026-27, which differs from Tax Year 2026-27. To file your ITR for AY 2026-27, make sure to do this on or before July 31, 2026.
Check out the details below to know what has changed with the new tax forms.
What has changed for US 401(k), or other overseas pension plan holders?
Section 89A offers individuals the option to defer payment of tax on income from foreign retirement benefit accounts from the year it is earned to the year it is withdrawn. This option is available only if the accounts are maintained in a notified country, and Form No. 10-EE is filed electronically. Also income from overseas pension plans must be reported in the ITR forms applicable to an individual.
Taxmann research says that in the new ITR forms, the columns for disclosing income from retirement benefit accounts maintained in both notified and non-notified countries have been removed from two ITR forms – ITR-1 and ITR-4.
Chartered Accountant Suresh Surana says that the removal of specific disclosure columns relating to foreign retirement benefit accounts from ITR-1 and ITR-4 for AY 2026–27 should be seen as a rationalisation exercise to align it with the requirement of disclosure of foreign assets.
Surana says: “Taxpayers holding foreign retirement accounts, such as a US 401(k), or other overseas pension plans, typically also hold a foreign asset and may have foreign-source income. Such taxpayers are generally not eligible to file ITR-1 (Sahaj) or ITR-4 (Sugam) in the first place.”
Surana points out that CBDT’s decision to remove these columns is intended to eliminate duplication, making the reporting consistent and align the forms with the existing filing framework. The obligation to disclose such foreign retirement accounts continues, but the disclosure would need to be made in the appropriate return form, typically ITR-2 or ITR-3, depending on the taxpayer’s income & assets.
Further, Surana says that in cases where the retirement account is maintained in a notified country under Section 89A, such as the US (subject to prescribed conditions), eligible resident taxpayers may continue to claim tax deferral by filing Form 10-EE, allowing taxation in India to be deferred until the time of withdrawal or maturity.
Taxmann research says that these changes aligns with the eligibility conditions for these returns. Income from such accounts naturally comes from foreign assets. It is considered foreign source income, and taxpayers holding foreign assets or earning foreign income are not eligible to file ITR-1 (Sahaj) or ITR-4 (Sugam). Therefore, the inclusion of these specific reporting fields in earlier versions of the forms was irrelevant, and their removal reduces redundancy and enhances consistency in the returns.
What should retired persons with such accounts do?
Surana says that retired individuals holding foreign retirement accounts should refrain from filing ITR-1 or ITR-4 if such accounts continue to exist during the relevant financial year. Instead, the appropriate return form should be filed, generally ITR-2 in cases where there is no business or professional income.
According to Surana, the foreign retirement account must be appropriately disclosed in Schedule FA (Foreign Assets), while any related income such as pension receipts, interest, dividends, or accretions should, as applicable, be reported under Schedule FSI (Foreign Source Income) and offered to tax in the return under the relevant head of income.
How to disclose foreign retirement accounts in Schedule FA and how much income tax to pay in India?
Surana says that the foreign retirement account should be disclosed in Schedule FA under the appropriate category, such as a foreign Interest in an Entity or foreign custodial account, as the case may be. Further, the disclosure is to be made for a calendar year. For instance, while filing the tax return for Financial Year 2025-26, Calendar Year 2025 (January to December 2025) needs to be considered.
From a taxability perspective in India, the treatment would depend on the nature of the income and the applicable provisions of the Income-tax Act. Further, withdrawals or pension receipts from such foreign retirement accounts may also be taxable in India, subject to the provisions of the applicable Double Taxation Avoidance Agreement (DTAA) and availability of treaty relief.
Surana says: “Where tax has already been paid overseas, the taxpayer may be eligible to claim foreign tax credit in India in accordance with the prescribed rules.”
Check out the details below to know what has changed with the new tax forms.
What has changed for US 401(k), or other overseas pension plan holders?
Section 89A offers individuals the option to defer payment of tax on income from foreign retirement benefit accounts from the year it is earned to the year it is withdrawn. This option is available only if the accounts are maintained in a notified country, and Form No. 10-EE is filed electronically. Also income from overseas pension plans must be reported in the ITR forms applicable to an individual.
Taxmann research says that in the new ITR forms, the columns for disclosing income from retirement benefit accounts maintained in both notified and non-notified countries have been removed from two ITR forms – ITR-1 and ITR-4.
Chartered Accountant Suresh Surana says that the removal of specific disclosure columns relating to foreign retirement benefit accounts from ITR-1 and ITR-4 for AY 2026–27 should be seen as a rationalisation exercise to align it with the requirement of disclosure of foreign assets.
Surana says: “Taxpayers holding foreign retirement accounts, such as a US 401(k), or other overseas pension plans, typically also hold a foreign asset and may have foreign-source income. Such taxpayers are generally not eligible to file ITR-1 (Sahaj) or ITR-4 (Sugam) in the first place.”
Surana points out that CBDT’s decision to remove these columns is intended to eliminate duplication, making the reporting consistent and align the forms with the existing filing framework. The obligation to disclose such foreign retirement accounts continues, but the disclosure would need to be made in the appropriate return form, typically ITR-2 or ITR-3, depending on the taxpayer’s income & assets.
Further, Surana says that in cases where the retirement account is maintained in a notified country under Section 89A, such as the US (subject to prescribed conditions), eligible resident taxpayers may continue to claim tax deferral by filing Form 10-EE, allowing taxation in India to be deferred until the time of withdrawal or maturity.
Taxmann research says that these changes aligns with the eligibility conditions for these returns. Income from such accounts naturally comes from foreign assets. It is considered foreign source income, and taxpayers holding foreign assets or earning foreign income are not eligible to file ITR-1 (Sahaj) or ITR-4 (Sugam). Therefore, the inclusion of these specific reporting fields in earlier versions of the forms was irrelevant, and their removal reduces redundancy and enhances consistency in the returns.
What should retired persons with such accounts do?
Surana says that retired individuals holding foreign retirement accounts should refrain from filing ITR-1 or ITR-4 if such accounts continue to exist during the relevant financial year. Instead, the appropriate return form should be filed, generally ITR-2 in cases where there is no business or professional income.
According to Surana, the foreign retirement account must be appropriately disclosed in Schedule FA (Foreign Assets), while any related income such as pension receipts, interest, dividends, or accretions should, as applicable, be reported under Schedule FSI (Foreign Source Income) and offered to tax in the return under the relevant head of income.
How to disclose foreign retirement accounts in Schedule FA and how much income tax to pay in India?
From a taxability perspective in India, the treatment would depend on the nature of the income and the applicable provisions of the Income-tax Act. Further, withdrawals or pension receipts from such foreign retirement accounts may also be taxable in India, subject to the provisions of the applicable Double Taxation Avoidance Agreement (DTAA) and availability of treaty relief.
Surana says: “Where tax has already been paid overseas, the taxpayer may be eligible to claim foreign tax credit in India in accordance with the prescribed rules.”
Next Story