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INTRODUCTION
Many NRIs and non-residents returning to India maintain retirement savings in various retirement benefit accounts. A large number of such retirement accounts are tax deferred in nature i.e. tax becomes payable in the jurisdiction in which the account is maintained only upon withdrawal from the account.
Retirement benefit accounts in the United States of America (USA), such as Section 401(k) accounts and traditional Individual Retirement Accounts (IRAs) are common examples of tax-deferred retirement benefit accounts.
Similarly, Canada has the Registered Retirement Savings Plan (“RRSP”), which is a government-registered retirement savings arrangement, while the UK has the Self Invested Personal Pension (“SIP”).
This article focuses primarily on the most prevalent retirement benefit accounts relating to the USA.
Retirement Benefit Accounts should not be confused with the social security benefits. Social security in the USA is primarily governed by the Social Security Act, 1935 and administered through Social Security Administration, which provides federal old-age, survivors, and disability insurance, together with unemployment compensation benefits.
In the case of income received by a residen
