Form explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Form No. 40 is how a resident who opened a retirement account abroad while living there tells the Indian tax system that the income accruing in that account should be taxed when it is withdrawn, not as it accrues. It is a one-time option that, once exercised, cannot be taken back. This guide explains the form as printed in the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026.
Under rule 74(3), the option is exercised for all the specified accounts of the specified person, in Form No. 40, furnished on or before "the due date specified under section 263(1)(c)". Under rule 74(5), once exercised it applies to all later tax years and cannot be withdrawn. The form has two Parts, a declaration and annexures A-1 to A-3. Which countries are "notified countries" is not yet notified in the text consulted.
The provisions behind the form
Section 158 of the Income-tax Act, 2025 says that income accrued to a specified person in a specified account is taxed in the manner and tax year that may be prescribed. A "specified person" is a person resident in India who opened a specified account in a notified country while non-resident in India and resident in that country. A "specified account" is an account kept in a notified country for retirement benefits, the income from which is taxed by that country at withdrawal or redemption and not on accrual. A "notified country" is one notified by the Central Government. See sections 155, 158 and 160 for the section.
Rule 74 is the prescribed manner. Under sub-rule (1), income accrued in a specified account during a tax year is, at the person's option, included in the total income of the year in which it is taxed on withdrawal or redemption in the notified country. Where the option is exercised, sub-rule (2) keeps out of the later year's total income any part that was already included in an earlier accrual year and taxed, and any part that was not taxable in India in the accrual year because the person was non-resident or not ordinarily resident, or because of a Double Taxation Avoidance Agreement. Foreign tax on that income is ignored for the foreign tax credit under rule 76. The post on rule 74 covers the rule; the foreign tax credit statement is in Form No. 44.
If you are a resident with accounts abroad, our NRI tax filing service can help you work out whether the option is available to you and how the returns are to be reconciled.
When and how the option is made
Rule 74(3) says the option is exercised for all the specified accounts the person maintains and in Form No. 40, furnished on or before the due date specified under section 263(1)(c). No calendar date is given here; check section 263. Rule 74(4) deals with a person who becomes non-resident during a relevant tax year: the option is deemed never to have been exercised from that year, and the accrued income is taxable in the immediately preceding tax year, with tax paid by the due date of filing the return for the relevant tax year.
What the form asks
| Part | Rows | What it asks |
|---|---|---|
| A | 1 and 2 | Name, address, Permanent Account Number, email ID and contact number of the specified person; the tax year for which the option is exercised |
| B | 3 | Details of every specified account (repeat if required) |
| B | 4 | The option itself: whether the income accrued in the accounts in row 3 shall be included in total income for the tax year in which it is taxed or taxable in the notified country at withdrawal or redemption (yes or no) |
| B | 5 | Other details as a separate enclosure, as Note 4 directs |
For each account, row 3 asks for the account number, the name of the retirement fund, the notified country (the form offers Canada, US, UK or another country to be specified), the balance on the last day of the financial year before the tax year, the date the account was opened, how the income is taxed in the notified country (accrual basis, receipt basis, or another basis), the tax year from which the income can be withdrawn, and the nature of income (salary, interest, dividend or others).
Row 3 then asks for two kinds of exclusions that follow rule 74(2). Items (ix) and (x) take the income already included in an earlier tax year under rule 74(2)(a), with the year, amount, whether a return was filed and its acknowledgement number. Items (xi) and (xii) take the income not taxable in India under rule 74(2)(b), with the tax years in which it was exempt because the person was non-resident or not ordinarily resident.
Declaration, Note and annexures
In the declaration the person states that the option has been exercised for all the specified accounts in row 3, that the option, once exercised for any tax year, cannot be withdrawn for that or any later year, and that the information is correct and complete to the declarant's knowledge and belief and in accordance with the Act. There is no accountant's certificate in this form; the specified person signs.
Note 3 repeats that an option exercised for a tax year applies to all subsequent years under rule 74(3), a reference the rule itself carries in sub-rule (5). Note 4 requires three annexures:
| Annexure | Particulars |
|---|---|
| A-1 | A copy of the statement of each specified account with the account number, the notified country and the balance on the last day of the financial year before the tax year |
| A-2 | Documentary evidence of how the income is or will be taxed in the notified country; the relevant statutory provision or another document may be attached |
| A-3 | The computation of income for all tax years in row 3(ix) in which the income was already included, reconciled with the return of income for those years, with a reconciliation statement furnished with the form |
Note 5 says amounts are in rupees unless otherwise provided.
An example
Meera Pillai, resident in India, opened a retirement account in Canada while she lived there as a non-resident of India. The account's income is taxed in Canada only on withdrawal. If she wants it taxed in India in the year of withdrawal, she files Form No. 40 for all her specified accounts, lists each account in row 3, answers Yes in row 4 and attaches the statements, the evidence of Canadian tax treatment and any computation for years in which she already offered income to tax. She cannot choose the option for one account only, and she cannot later reverse it.
Need help with a foreign retirement account?
The option cannot be undone, so the choice should be made after looking at the account, the countries involved and the returns already filed. Our NRI tax filing team can help you assess the position and prepare the annexures.
Key takeaways
- Form No. 40 is the option under rule 74 for tax on a retirement benefit account to arise on withdrawal.
- It covers all specified accounts, is due by the date specified under section 263(1)(c), and cannot be withdrawn.
- Part A names the person and the tax year; Part B lists accounts, the exclusions and the option.
- Annexures A-1 to A-3 carry the statements, the foreign tax evidence and the reconciled computation.
- The notified countries are not yet notified in the text consulted.
Read next
- Rule 74: retirement benefit account in a notified country
- Form Nos. 46 and 47: multi-year arm's length price option and accountant's certificate
- Form No. 44: statement of foreign income and foreign tax credit
- Form Nos. 34 and 35: accountant's reports for section 146 and 147 deductions
Disclaimer: Based on the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026, as consulted on 4 October 2026. It explains the words of the forms and rules only; later notifications, the forms and utilities on the e-filing portal, circulars and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.