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I am wondering if India distinguishes between pre-tax and roth IRA/401k accounts.

So, if I am contributing to a roth account (401k and/or IRA) - would I have to pay taxes in India again:

  1. On the principal and earnings
  2. Just the earnings
  3. Neither.
  4. If neither, would this still count as taxable income in India (potentially putting me at a higher tax bracket even if I am not directly paying taxes on this amount)?

Assumption: The person is an Indian citizen and was working in the US on F1/H1b/Green card (maybe even some combination of all three). He them moved to India where the withdrawal and/or distribution took place.

Existing Knowledge:

  • According to Article 20 of the Double Tax Treaty Agreement, any private pensions would be taxed in India only. This clearly means that my pre-tax IRA distributions and withdrawals will be taxed in India. The question is if this applies to Roth accounts as well?

  • According to this website: If NRI return to India with the intention of permanently residing in India, the assets brought by him will be exempt. Also, the money and the assets acquired from the money, brought by NRI within one year after his return, will be exempt. This exemption is available to NRI for a period of seven years after his return to India. [Sec. 5(1)(v)]

    Would this affect the roth account (assuming a distribution took place after more than 7 years of return)?

  • Not an expert in Indian tax law, but the general principle is that if the money hasn't been taxed before - it should be taxable. Your Roth hasn't been taxed by India before. – littleadv Apr 6 '14 at 6:14
  • Well, Roth has been taxed in the US though? – Aayush Kumar Apr 6 '14 at 6:21
  • But not in India... If the foreign income exclusion doesn't exist any more for your foreign incomes - that includes the Roth money, doesn't it? Again - I know nothing about Indian tax law, just making "educated" guesses. – littleadv Apr 6 '14 at 12:02
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•According to this website: If NRI return to India with the intention of permanently residing in India, the assets brought by him will be exempt. Also, the money and the assets acquired from the money, brought by NRI within one year after his return, will be exempt. This exemption is available to NRI for a period of seven years after his return to India. [Sec. 5(1)(v)]

I think you have got the essense. If you are returning for good, you can bring all your money earned outside of India into India tax free. The time period is 7 years. Post this whatever amount you bring in will be taxable. There is nothing specific in Indian Tax laws on the treatment to Retirement funds outside of India.

If the amounts are large, its best if you consult a CA for advise.

  • Which website? Equity does not attract wealth tax or it's 7 year exemption as per this MEA pdf. – vishvAs vAsuki Mar 19 at 1:19
  • @vishvAsvAsuki The website linked by the OP in his question. – Dheer Mar 20 at 2:11
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Equity does not attract wealth tax or it's 7 year returning NRI exemption as per this MEA pdf and this wealth tax pdf.

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