Returning to India: How to claim Employer Pensions and 401(k)

Indians moving back home after overseas jobs are asking a simple, high‑stakes question: what happens to money saved in employer retirement plans—both in India and abroad—and how do they claim it without losing out to double social security contributions or surprise taxes? The answer depends on whether the savings sit in India’s EPF/EPS or in a foreign plan such as a 🇺🇸 401(k), and whether treaties and paperwork like a Certificate of Coverage can protect against paying twice.

At the Indian end, workers who contributed to the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) can usually claim the balance after leaving the job or moving back to India. Claims are filed online through the EPFO portal, or offline with employer and bank details attached. India also has social security agreements with several countries that allow pension portability, which means the right to receive pension in India or to avoid double contributions while posted abroad.

For employees who were sent overseas by an Indian employer but stayed covered in EPF, asking the EPFO for a Certificate of Coverage is a key protection. It serves as proof to foreign authorities that social security is already covered in India, cutting the risk of forced contributions in the host country.

Policy context and government process

• EPF/EPS claim steps
  • After employment ends, workers can request withdrawal of EPF and, where eligible, apply for EPS benefits.
  • This can be done online with Aadhaar‑linked credentials, or through the employer’s HR team using offline forms.
  • The EPFO has detailed instructions on eligibility, timelines, and required bank KYC on its official website.
  • For process details and updates, visit the Employees’ Provident Fund Organisation (EPFO) site.
• Social security agreements
  • If you worked in a country that has a bilateral social security agreement with India, you may rely on pension portability rules to receive your pension in India or avoid paying into two systems at once.
  • Where an Indian posting is involved and EPF coverage continues, a Certificate of Coverage from EPFO is often the document foreign authorities request to accept that India’s system already covers the worker.
• Foreign pensions (401(k), IRA, etc.)
  • There are three basic paths for US-style accounts:
  1. Leave the account until US retirement age (often 59½).
  2. Roll it over to another US retirement account (Traditional or Roth IRA).
  3. Withdraw early, incurring penalties and taxes.
  • VisaVerge.com reports that these choices come with different filing and tax results in both countries, so returning Indians should match the timing of withdrawals to their planned tax strategy in India.

Impact on returning workers and tax treatment

• India taxes residents on global income. Withdrawals from foreign retirement plans—such as a 401(k) distribution or an IRA payout—are generally taxable in India in the year you take the money.
• How the payment is classified determines where it appears on your Indian return:
  • Income from Salary — for regular pension payments.
  • Income from Other Sources — for lump sums or other non‑pension formats.
• If tax was withheld abroad, a foreign tax credit may be available under a Double Tax Avoidance Agreement (DTAA), but the exact credit depends on the treaty and the documents you can provide.

Section 89A and timing relief

• There is relief for returning NRIs with foreign retirement savings accrued while they lived outside India.
• Under Section 89A of the Income‑tax Act, you can ask to pay Indian tax in the year you actually withdraw from the foreign plan, instead of each year on the plan’s accruals.
• To use this relief, submit Form 10‑EE through the Income Tax e‑filing portal before filing your return for that year.
• Filing Form 10‑EE helps align your Indian tax timing with the foreign plan’s withdrawal schedule and can reduce the risk of mismatched tax years that cause double taxation.
• File your Indian return as usual and claim foreign tax credits as allowed by the treaty with the source country once withdrawals happen.

Practical tax planning notes

• For many families, the choice to leave a 401(k) untouched until retirement may be simplest. It can:
  • Reduce immediate tax costs.
  • Avoid early withdrawal penalties in the US.
  • Give time to plan Indian tax treatment under Section 89A.
• A rollover to a Traditional IRA may offer more investment choice, but some US providers restrict new accounts for non‑US residents; confirm eligibility and servicing rules before moving money.
• Early withdrawals are usually a last resort because of penalties and tax consequences.

EPF/EPS specifics on return

• If you have crossed the required service years, EPS may provide a monthly pension.
• If not, EPF withdrawal rules allow access to your contributions and employer deposits.
• Ensure your bank details and KYC are up to date to avoid delays.
• Keep copies of job exit letters, pay records, and identity documents ready.
• Workers who were seconded abroad should keep the Certificate of Coverage on file; it can be requested by foreign or Indian authorities to settle compliance questions when claiming benefits.

Practical steps for a smoother return

1. EPF / EPS
   • Log into the EPFO portal to start a claim for withdrawal or pension.
   • Ensure Aadhaar, PAN, and bank account are seeded and verified.
   • If you were posted abroad while covered by EPF, retain your Certificate of Coverage as proof for social security coordination.
2. Foreign 401(k) / IRA
   • Ask the plan administrator about options to leave funds, roll over, or withdraw.
   • Note that withdrawals before age 59½ in the US may trigger penalties and taxes under US law.
   • In India, report any withdrawal as part of your global income in the year you receive it.
3. Indian taxes for foreign pensions
   • To defer Indian tax on foreign retirement income accrued while you were non‑resident, submit Form 10‑EE on the Income Tax e‑Filing portal before filing your return.
   • Where tax is paid abroad, explore treaty relief and claim foreign tax credits in India with proper documents.

What determines which country taxes first

• The answer depends on:
  • Plan type (pension, lump sum, retirement account).
  • Applicable tax treaty (DTAA) with the source country.
  • Tax residency status in each tax year.
• Section 89A helps align India’s tax year to the foreign payment year but does not eliminate foreign tax rules or penalties.
• Maintain a precise, written record — plan statements, withholding slips, and Form 10‑EE acknowledgment — to support claims and credits.

Employers in India can help returning staff by confirming EPF/EPS service records, approving exit dates promptly on the EPFO system, and supporting pension portability where social security agreements apply. For multinational postings, HR should check if a Certificate of Coverage is needed before assignment to avoid double contributions.

Additional employer and family planning tips

• Employers:
  • Confirm EPF/EPS service history and assist with EPFO filings.
  • Approve exit dates and provide required documentation quickly.
  • Support pension portability and Certificate of Coverage requests for overseas postings.
• Families:
  • Plan cash needs: EPF withdrawals can take time and foreign rollovers/transfers may require additional bank compliance checks.
  • Keep records handy for tax filings and treaty claims.

According to analysis by VisaVerge.com, clarity on EPF rules, pension portability, and Indian tax timing can prevent costly mistakes in the first year after moving back. The broad goal is simple: keep your retirement savings intact, avoid paying into two systems for the same work, and pay tax once, in the right year, with the right credits.