Are you an NRI (Non-Resident Indian) who has moved back to India and is now planning to withdraw funds from your 401(k) retirement account in the United States? Or are you still abroad but planning a 401(k) distribution soon?

Understanding the tax implications, disclosure requirements, and compliance obligations in both the US and India is crucial—especially if you now hold Resident and Ordinarily Resident (ROR) status in India.

In this guide, we explain the role of Form W8BEN, applicable withholding tax, reporting obligations in India, and most importantly—how Dinesh Aarjav & Associates can help you in making your 401(k) withdrawal smooth, compliant, and tax-efficient.

What Is Form W8BEN and Is It Required for 401(k) Withdrawal?

Yes, Form W8BEN is essential before making a 401(k) withdrawal if you are a non-resident of the United States. This IRS form certifies that:

• You are a non-resident alien (NRA) under US tax laws
• You are claiming benefits (if any) under the India-US Double Taxation Avoidance Agreement (DTAA)

Although submitting W8BEN is mandatory, please note that the India-US DTAA does not offer a reduced withholding tax rate specifically for 401(k) accounts. As a result, most plan administrators or brokers will deduct a flat 30% tax on the gross amount withdrawn.

US Tax on 401(k) Withdrawals for NRIs

After W8BEN submission, and once the 401(k) distribution is processed, here's what you can expect:

30% Withholding Tax

• Flat 30% tax on withdrawal, applicable to non-resident aliens
• Early withdrawal penalty of 10% if taken before age 59½ (unless exempted)

US Filing Requirement: Form 1040-NR

If you have made a 401(k) withdrawal, you must file Form 1040-NR (U.S. Nonresident Alien Income Tax Return) to report the income and calculate your final tax liability.

• If contribution vs. investment split is available:
• Contributions taxed at graduated slab rates
• Earnings taxed at flat 30%
• If no split is available:
• Entire withdrawal taxed at 30%

This filing is crucial to avoid double taxation, and to potentially claim any refund if excess tax was withheld.

Indian Tax Implications on 401(k) Withdrawal – For RORs

If you’ve returned to India and have become a Resident and Ordinarily Resident (ROR) under Indian tax law, your global income becomes taxable in India. This includes foreign retirement accounts like 401(k).

Indian Tax Return Disclosures

• Schedule FA (Foreign Assets)
• Mandatory disclosure of 401(k) account under foreign retirement or pension accounts
• Schedule FSI (Foreign Source Income)
• 401(k) income to be declared in both foreign currency (USD) and INR

Country of source: United States

• Schedule OS or Schedule CG
• Income may be reported under Schedule OS (Other Sources)
• In rare cases, if withdrawal is classified as capital gain, report under Schedule CG
• Schedule TR (Tax Relief)
• If US tax is paid, claim foreign tax credit (FTC) under India-US DTAA

File Form 67 online on the Income Tax Portal before filing your ITR

How Dinesh Aarjav & Associates Can Help with 401(k) Withdrawal

At Dinesh Aarjav & Associates, we specialize in cross-border tax planning for NRIs, OCIs, and returning Indian residents. Our expert team offers end-to-end support for 401(k) withdrawals, ensuring you stay fully compliant in both India and the US.

Our Services Include:

• Reviewing your residential status in India (to determine ROR or NRI treatment)
• Assisting with submission of Form W8BEN to your US broker or plan administrator
• Filing Form 1040-NR for the relevant financial year in the US
• Splitting your 401(k) balance into contribution vs earnings (where records permit)
• Claiming refund of excess tax withheld on your 401(k) distribution
• Advising on 10% early withdrawal penalty relief (if applicable)
• Assisting with reporting your 401(k) account in Schedule FA, FSI, OS/CG, and TR
• Filing Form 67 and claiming Foreign Tax Credit (FTC)
• Minimizing your overall tax liability through strategic planning

Whether you are withdrawing a lump sum or planning systematic withdrawals from your 401(k) after returning to India, we ensure complete peace of mind with expert tax advisory.

Step-by-Step Summary for NRIs Withdrawing 401(k) on Return to India

Frequently Asked Questions (FAQs)

Q.1 Do I have to file W8BEN for 401(k) if I’ve moved back to India?

Ans: Yes. You must submit Form W8BEN to certify your foreign residency status to your US broker.

Q.2 Will filing W8BEN reduce my tax on 401(k)?

Ans: No. While required, it does not reduce the 30% flat withholding tax, as there is no specific relief in India-US DTAA for 401(k) income.

Q.3 Can I claim the 30% tax paid in the US in India?

Ans: Yes, if you are a Resident and Ordinarily Resident (ROR) in India, you can claim credit for US tax paid by filing Form 67 and disclosing in Schedule FSI/TR.

Q.4 Will the 401(k) be taxed again in India?

Ans: Yes, unless you claim the foreign tax credit, your 401(k) income could be taxed again in India. Proper planning ensures no double taxation.

Conclusion

Handling a 401(k) withdrawal while transitioning from an NRI to an Indian tax resident requires careful planning, documentation, and tax compliance. Filing Form W8BEN, paying US taxes, and disclosing the 401(k) correctly in your Indian ITR are all essential steps.

At Dinesh Aarjav & Associates, we help you navigate this process seamlessly—ensuring that you stay fully compliant with IRS, Indian Income Tax Department, and DTAA provisions.

Let us help you withdraw your 401(k) with confidence.