I am planning to return to India, what will happen to my retirement account & how will be taxation for Returning NRI from retirement accounts (401k & IRA)?
Returning NRIs from US holding brokerage accounts? Don’t Forget to File Form W-8BEN
What is Form W-8BEN?
Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) is a U.S. IRS form used by non-U.S. persons to:
Certify that they are not U.S. citizens or residents; and
Claim tax treaty benefits between the U.S. and their country of residence (e.g., India).
Why Should Returning NRIs File Form W-8BEN?
1. Avoid Excessive U.S. Tax Withholding
Without Form W-8BEN, U.S. brokers and financial institutions are required to withhold 30% tax on dividends, interest, and other investment income.
2. Exemption from U.S. Capital Gains Tax
Indian tax residents are generally not liable for capital gains tax in the U.S. on sale of U.S. stocks. Filing W-8BEN notifies your U.S. broker of your non-resident status, thereby ensuring that no capital gains tax is withheld.
When Should You File Form W-8BEN?
You should file Form W-8BEN immediately after returning to India and becoming a resident for Indian tax purposes.
Common Scenarios Where W-8BEN is Applicable:
Holding U.S. brokerage accounts (e.g., Fidelity, E-Trade, Charles Schwab)
Receiving RSUs or stock-based compensation
Maintaining U.S.-based retirement accounts like 401(k) or IRA
What Happens If You Don’t File Form W-8BEN?
If a returning NRI fails to submit Form W-8BEN, the U.S. broker will treat them as a regular U.S. resident for tax purposes and deduct tax at higher rates. The excess tax withheld can still be claimed by filing a Form 1040-NR (Non-Resident U.S. Tax Return) at the end of the tax year.
How We Help at India for NRI
Assist in determining correct tax residency and treaty eligibility
Help claim Foreign Tax Credit (FTC) in your Indian tax return, if tax has been withheld in the U.S.
Provide expert consultancy to returning NRIs for cross-border tax and compliance issues related to the U.S. and India
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Read MoreReturning NRIs from US holding brokerage accounts? Don’t Forget to File Form W-8BEN
What is Form W-8BEN?
Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) is a U.S. IRS form used by non-U.S. persons to:
Certify that they are not U.S. citizens or residents; and
Claim tax treaty benefits between the U.S. and their country of residence (e.g., India).
Why Should Returning NRIs File Form W-8BEN?
1. Avoid Excessive U.S. Tax Withholding
Without Form W-8BEN, U.S. brokers and financial institutions are required to withhold 30% tax on dividends, interest, and other investment income.
2. Exemption from U.S. Capital Gains Tax
Indian tax residents are generally not liable for capital gains tax in the U.S. on sale of U.S. stocks.
Filing W-8BEN notifies your U.S. broker of your non-resident status, thereby ensuring that no capital gains tax is withheld.
When Should You File Form W-8BEN?
You should file Form W-8BEN immediately after returning to India and becoming a resident for Indian tax purposes.
Common Scenarios Where W-8BEN is Applicable:
Holding U.S. brokerage accounts (e.g., Fidelity, E-Trade, Charles Schwab)
Receiving RSUs or stock-based compensation
Maintaining U.S.-based retirement accounts like 401(k) or IRA
What Happens If You Don’t File Form W-8BEN?
If a returning NRI fails to submit Form W-8BEN, the U.S. broker will treat them as a regular U.S. resident for tax purposes and deduct tax at higher rates.
The excess tax withheld can still be claimed by filing a Form 1040-NR (Non-Resident U.S. Tax Return) at the end of the tax year.
How We Help at India for NRI
Assist in determining correct tax residency and treaty eligibility
Help claim Foreign Tax Credit (FTC) in your Indian tax return, if tax has been withheld in the U.S.
Provide expert consultancy to returning NRIs for cross-border tax and compliance issues related to the U.S. and India