Income Tax Form 40: Option for Relief on Foreign Retirement Benefit Account Income

Form 40 is a prescribed form under section 158 of the Income-tax Act, 2025 that enables resident individuals to claim tax relief on income from foreign retirement benefit accounts maintained in notified countries such as the USA, UK, Canada, and Australia. By exercising this option, taxpayers can defer taxation in India until the income is actually withdrawn or redeemed, thereby avoiding double taxation where the same income is taxed abroad on withdrawal basis. Filing Form 40 is mandatory to avail this relief and must be completed electronically before the due date of return filing. The option, once exercised, is irrevocable and applies to all specified accounts and subsequent tax years. The form requires detailed disclosures, supporting documents, and reconciliation of prior income. Failure to file or incorrect filing may deny relief. Overall, Form 40 ensures alignment of tax treatment across jurisdictions, enhances compliance, and provides certainty in taxation of foreign retirement income.

Income Tax Department
Ministry of Finance, Government of India

FAQs on Income Tax Form 40: Exercise of option for relief from taxation in income from retirement benefit account maintained in a notified country under section 158 of Income Tax Act, 2025

Form for exercise of option for claiming relief under section 158 of the Income-tax Act’ 2025

Q1: What is Form 40 ?

Ans: Form 40 is the prescribed form for exercise of option to claim the tax relief under section 158 of the Income-tax Act’ 2025 (“ITA 2025”) by a person resident in India, in respect of income from a retirement benefit account, maintained in a notified country. The countries notified for this purpose of this relief are USA, UK, Canada, and Australia, at present. On exercise of option, the Indian resident gets the relief from taxation of income on accrual basis in India, in case such income from retirement benefit account is taxed at the time of withdrawal or redemption in the notified country. In other words, filing of this Form allows for the deferral of taxation until the income is withdrawn or redeemed in the foreign country.

Q2: Who should file Form 40?

Ans: Any specified person (being a person resident in India, who had opened a retirement benefit account in a notified country, while being a resident of that country and non-resident in India), may, at his option, file Form 40 to claim the tax relief under Section 158 of ITA 2025. The option once exercised, cannot be revoked for that tax year, and it applies to all subsequent tax years. The option has to be exercised by the resident person for all such retirement benefit accounts maintained in the notified country.

Q3. Who is required to verify the Form 40?

Ans. The specified person, who intends to exercise the option for claiming the tax relief under section 158, is required to make a self-declaration in Part B of the Form 40, to the effect that he has exercised this option for all specified accounts maintained in the notified country. The details of all such specified accounts are required to be mentioned in the Row 3 of Part B. The specified person is further required to affirm the condition that the option, once exercised for any tax year, cannot be withdrawn for that tax year or any subsequent year.

Q4: Where and how the Form 40 is required to be filed?

Ans: The Form 40 shall be filed electronically on the e-filing portal of Income-tax Department. The form shall be furnished electronically either under digital signature or through electronic verification code, duly verified by the specified person.

Q5: What is the time limit for filing Form 40?

Ans: The Form 40, for exercise of option for claiming tax relief under section 158 of the ITA’ 2025, is required to be filed electronically on or before such “due date” for filing return of income prescribed under section 263(1)(c) of the ITA’ 2025, as may apply for the specified person claiming the tax relief. This time limit is specified in the relevant rule.

Q6: What documents are required to file Form 40?

Ans: The following documents/details may be required while filing Form 40, –

> Specified Account or Foreign Retirement Account details – Account number(s), Date of account opening, Account balance at the end of the previous tax year.

> Name of the retirement fund and the notified country.

> Details of income already taxed in India in earlier years, if any.

> Copy of statement of the specified account having above details.

> Document showing how the income from specified account has been taxed or is taxable in the notified country including relevant statutory provision of the notified country or any other relevant document.

> Computation of income for all the tax years in which the income from specified account has already been included in the total income.

> A reconciliation statement of the computation of income with the return of income for the said tax years.

Q7. Is Form 40 mandatory?

Ans: Exercise of option by way of filing a valid Form 40 within the specified time limit, is a mandatory condition for making an admissible claim of tax relief under section 158, by the specified person, in respect of income from a retirement benefit account, maintained in a notified country. The option, however, once exercised for any tax year, shall continue to be valid for that tax year and all subsequent tax years.

Q8: Can I edit Form 40 after submission?

Ans: No. Once Form 40 is validly submitted, after self-declaration by the specified person, and acknowledgment is generated, it cannot be edited. Please ensure that all details are correct before final submission.

Q9: Do I need to attach any document with the Form 40?

 Ans: The following documents are mandatory to be attached, as required at Serial Number 5 (Part B) of the Form EE, –

> Annexure A1– A copy of statement of the specified account having the details of account number, the notified country, and the account balance as on last date of the financial year prior to the tax year for which the option is exercised;

> Annexure A2– Documentary evidence to show how the income from specified account has been taxed or is taxable in the notified country. Relevant statutory provision of the notified country or any other relevant document may be attached.

> Annexure A3– The computation of income for all the tax years in which the income from specified account has already been included in the total income. The computation has to be reconciled with the return of income for the said tax years. A reconciliation statement of the computation of income is to be attached.

Q10: While filling Part A and Part B, can I leave any field blank?

Ans:

> PAN of the specified person is mandatory. Name and complete address thereof shall be pre-filled, which can be updated by the user.

> An updated Email address and Mobile number would ensure faster communication and verification; therefore it is recommended to provide it.

> Details of all specified accounts maintained in any notified country, in Row 3 of Part B may be provided, as applicable.

> Details of option exercised in Row 4 of Part B is a mandatory field.

Q11: What if the specified person exercising the option does not have a PAN?

Ans: Form 40 cannot be submitted without a valid PAN of the specified person exercising the option to claim the tax relief.

Q12: Can Form 40 be filed offline?

Ans: No. Form 40 can only be submitted online through the Income Tax e-Filing portal.

Q13: Why is Form 40 important?

 Ans: Exercise of option by way of filing of a valid Form 40 within the specified time limit is a mandatory compliance for claiming tax relief by a specified person, in respect of income from a retirement benefit account, maintained in a notified country, under section 158 of the ITA’ 2025. However, the claim of tax relief is further subject to fulfillment of certain other eligibility conditions, as prescribed in the relevant rule.

Guidance Note on Income Tax Form 40: Exercise of option for relief from taxation in income from retirement benefit account maintained in a notified country under section 158 of Income Tax Act, 2025

Purpose:

Form 40 is prescribed under Rule 74 and is required to be filed by Indian residents to claim tax relief under Section 159 of ITA 2025 for income accrued in a foreign retirement account maintained in a notified country (e.g., USA, UK, Canada, Australia). This form allows for the deferral of taxation until the income is withdrawn or redeemed in the foreign country.

The purpose of the provision is to prevent double taxation on income from a foreign retirement fund that might be taxed both on an accrual basis in India and on a withdrawal basis in the foreign country. By allowing the relief claimed through this form, tax is deferred in India until the year of withdrawal from the foreign account, aligning the tax treatment in both jurisdictions.

Who Should File:

The form is to be filed by a “specified person” (resident Indian) who has a retirement account in a “notified country”, to claim tax relief under Section 159 of the Income Tax Act.

The applicant should not have previously exercised this option, because the option, once exercised, is irrevocable, and it applies for all future years and all specified accounts.

When and How to File:

1. The form shall be filed on e-filing portal.

2. The form shall be furnished electronically either under digital signature or through electronic verification code verified by the resident Indian.

3. The form must be filed on or before the due date for furnishing the income tax return (ITR) for the relevant tax year.

4. The form must be verified by the resident Indian.

Filing Count:

The number of Form 40 filed over the past five years is 977.

Structure of Form 40:

• Basic Details: Name, PAN, address, Tax year, residential status,
• Details of Specified Retirement Benefit Account(s): Country’s name, account number,
• Income details: Nature of income, amount accrued, withdrawn etc.
• Declaration of option
• Formal verification by the applicant.

What are the documents required to file the Form 40?

Following documents are required for filing Form 40:

• Specified Account or Foreign Retirement Account details – Account number(s), Date of account opening, Account balance at the end of the previous tax year.
• Name of the retirement fund and the notified country.
• Details of income already taxed in India in earlier years, if any. A copy of instrument of trust evidencing the formation of the fund.
• Copy of statement of the specified account having above details.
• Document showing how the income from specified account has been taxed or is taxable in the notified country including relevant statutory provision of the notified country or any other relevant document.
• Computation of income for all the tax years in which the income from specified account has already been included in the total income. A reconciliation statement of the computation of income with the return of income for the said tax years.

What is the process flow of filing Form 40?

The process flow includes following steps

• Prepare the application: Fill Form 40, ensuring all columns are complete with accurate details.
• Attach mandatory documents.
• Sign/verify: Application, annexures, and all attached statements must be signed or digitally signed or electronically verified by the Resident Indian.
• Submit online on the e-filing portal.

Outcome of processed Form 40:

• Where the declaration is accepted, the applicant is taxed in India only when withdrawals happen from the specified retirement accounts, not on annual accruals.
• This gets applicable for all successive tax years.

Key updates include the following

• Dropdown has been provided to in data fields relating to nature of income, and manner of taxation of income in the notfied country.
• Data field relating to address of specified person has been omitted.
• Declaration has been substituted by Verification, and language has been simplified.

Improved Applicant Experience, Expedited Process:

The language of the Form has been simplified. The data fields sought to be captured have been rationalized and standardised, viz. dropdown etc.