In India, under the provisions of the Indian Income Tax Act, 2025, income from certain foreign retirement pension accounts, like a US 401(k), is taxable only on maturity or withdrawal, as outlined by Rule 74, provided you have already filed Form 40 and opted for tax deferral. For those who aren't familiar, Form 40 is beneficial for individuals with residential or ordinarily resident status in India who have foreign pension accounts like the U.S. 401k. By filing Form 40, you can postpone taxation in India until the year when the amount is taxed upon withdrawal or redemption in the foreign country. Form 40 typically needs to be filed electronically before the income-tax return (ITR) filing deadline.Also under the new Income Tax forms for AY 2026-2027 (not the same as tax year 2026-2027), US 401(k) and other overseas pension account details can no longer be reported in Forms ITR-1 and ITR-4. Now, you must file ITR-2 or ITR-3 to report these foreign pension accounts.Also read: Worked in the US, UK or Canada? Form 40 can help Indians defer income tax liability on foreign pension accountsHow to report foreign pension account in ITR?Vikas Sharma, Lead-Personal Tax, AKM Global, a tax and consulting firm, said to ET Wealth Online that income from foreign pension accounts must be reported under the head of income 'Income from Other Sources' (IFOS) in Schedule Foreign Source Income (FSI) at the taxpayer's applicable slab rate. Sharma says: "Additionally, it is mandatory to disclose details of foreign retirement accounts in Schedule Foreign Assets (FA) of the income-tax return to ensure regulatory compliance."It must be noted that in the USA, the taxation of a 401(k) is governed by the specific nature of the contribution plan. Sharma says that for a traditional 401(k), tax on both contributions and earnings is deferred until the distribution of funds, which is then taxed at the applicable federal income tax brackets. Sharma says: "It is important to note that distributions initiated before the age of 59.5 may incur an additional 10% early withdrawal penalty, unless the taxpayer qualifies for specific statutory exceptions, such as those related to medical expenses or qualified natural disasters."What about DTAA benefits with the USA?According to Sharma, under traditional 401(k) plans and similar retirement schemes in the United States, taxation generally occurs at the time of withdrawal rather than during the accumulation phase. Accordingly, no tax is paid in the US while the income is accruing within the plan. As a result, when such income is taxed in India during the accumulation phase, there may be no corresponding U.S. tax paid at that time against which a Foreign Tax Credit (FTC) can be claimed. Sharma says: "Consequently, the individual may not be able to avail FTC in India under the India-USA Double Taxation Avoidance Agreement (DTAA) in respect of such income."According to Sharma, under Article 20 (Private Pensions, Annuities, Alimony, and Child Support) of the India-USA DTAA, the agreement grants the residence country the right to tax pension income at the time of actual distribution (i.e., when periodic payments are made), rather than at the time of accrual. Thus, according to Sharma, the DTAA relief may not be available effectively when India seeks to tax such income on an accrual basis. In this context, it is prudent to opt for deferment of taxation in India by filing Form 40.Filing Form 40 allows taxation in India to align with the timing of taxation in the United States. Consequently, at the time of withdrawal or retirement, the taxpayer may be able to claim the benefit of Foreign Tax Credit (FTC) in India against the taxes paid in the United States.