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I have 401(K) account in USA. I am a US Citizen of Indian Origin.

I plan to R2I next year.

I am likely to be in RNOR status during the fiscal years 2015-2016, 2016-2017, and 2017-2018

I am aware of the taxes and penalties to be paid in USA while the 401(K) amount is withdrawn as a lump sum or in multiple distributions. In order to minimize my US taxes on 401(K) withdrawals (i.e., pay taxes at lower rates), I would like to withdraw the 401(K) in multiple distributions over a number of years ( say 5 to 7 years).

I would like to understand how these 401(K) withdrawals will be treated from Indian tax point of view. I would appreciate answers to the following questions:

  1. 401K amount withdrawn while in RNOR Status is held in US bank account

  2. 401K amount withdrawn while in RNOR Status is repatriated to India while in RNOR status

  3. 401K amount withdrawn while in RNOR Status is repatriated to India while not in RNOR status

  4. 401K amount withdrawn while not in RNOR Status is held in US bank account

  5. 401K amount withdrawn while not in RNOR Status is repatriated to India

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There is no difference to the Tax treatment of 401(K) withdrawal. This is considered tax free and you can remit the funds back to India within a period of 7 years.

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