Yes—if this is retirement money, contributing can be a good idea before you return to India, especially when you will keep an employer match.

Employee contributions; vesting and forfeiture

An employee's own contributions to the plan (for example, employee elective deferrals deducted from salary) are always 100% vested, or owned, by the employee. Amounts that are not vested may be forfeited by employees when they are paid their account balance (for example, when the employee terminates employment) or when they don’t work more than 500 hours in a year for five years.

Leaving your job: options 1 and 4

1. Leave your money in the plan You can roll over the old plan’s balance to a traditional or a Roth IRA.

Contributions; Taxation of withdrawals

Traditional, pre-tax employee elective contributions are made with **before-tax dollars**. Designated Roth employee elective contributions are made with **after-tax dollars**. Withdrawals of contributions and earnings **are** subject to federal and most state income taxes. Withdrawals of contributions and earnings are **not** taxed provided it’s a **qualified distribution** – the account is held for at least 5 years and made: On account of disability, On or after death, or On or after attainment of age 59½.

Tax on early distributions; Rollovers from your 401(k) plan

If a distribution is made to you under the plan before you reach age 59½, you may have to pay a 10% additional tax on the distribution. This tax applies to the amount received that you must include in income. Made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55, You can choose to have your 401(k) plan transfer a distribution directly to another eligible plan or to an IRA.

Highlights of changes for 2026

The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $24,500, up from $23,500 for 2025.

Chapters 3 and 5; participant-directed plan disclosures

As noted previously, there is also a booklet that describes the key plan rules, called the Summary Plan Description (SPD) , which should be much easier to read and understand. The plan should provide this information before you can direct investments for the first time and annually thereafter with information on the fees and expenses actually paid provided at least quarterly. If you are leaving your benefits in your former employers plan, be sure to keep your contact information up to date with the former employer, and keep track of the employers contact information.

Purpose, eligibility, filing method and filing deadline

In other words, filing of this Form allows for the deferral of taxation until the income is withdrawn or redeemed in the foreign country. Any specified person (being a person resident in India, who had opened a retirement benefit account in a notified country, while being a resident of that country and non-resident in India), may, at his option, file Form 40 to claim the tax relief under Section 158 of ITA 2025. The option has to be exercised by the resident person for all such retirement benefit accounts maintained in the notified country. The Form 40 shall be filed electronically on the e-filing portal of Income-tax Department. The Form 40, for exercise of option for claiming tax relief under section 158 of the ITA’ 2025, is required to be filed electronically on or before such “due date” for filing return of income prescribed under section 263(1)(c) of the ITA’ 2025, as may apply for the specified person claiming the tax relief.

Section 5(1)

Subject to the provisions of this Act, the total income of any tax year of a person, who is a resident, includes all income from whatever source derived, which— (a) is received or deemed to be received in India in that year by or on behalf of such person; (b) accrues or arises, or is deemed to accrue or arise, to such person in India in that year; or (c) accrues or arises to such person outside India in that year, but when such person is “not ordinarily resident” in India under section 6(13), such income shall be included only when it is derived from a business controlled in or a profession set up in India.

Articles 20(3) and 1(3)

The term "pension" means a periodic payment made in consideration of past services or by way of compensation for injuries received in the course of performance of services. Notwithstanding any provision of the Convention except paragraph 4, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if the Convention had not come into effect.

Explanations of Articles 20 and 23

Paragraph 1 provides that private pensions and any annuities derived by a resident of a Contracting State from sources within the other Contracting State are taxable only in the State of residence of the recipient. Thus, all payments under this Article (pensions, annuities, alimony and child support) must be periodic payments, and a single lump- sum payment does not qualify. This is not an exclusive taxing right; the residence State may continue to tax.

Pensions, Annuities, and Alimony—Income Code 15

For purposes of chapter 3 withholding, in the absence of a treaty exemption, you must withhold at the statutory rate of 30% on the entire distribution that is from sources within the United States. You may, however, apply withholding at graduated rates to the part of a distribution that arises from the performance of services in the United States after December 31, 1986.

Giving Form W-8BEN to the withholding agent; Who Must Provide Form W-8BEN

Provide Form W-8BEN to the withholding agent or payer before income is paid or credited to you. Do not send Form W-8BEN to the IRS. You are a U.S. citizen (even if you reside outside the United States) or other U.S. person (including a resident alien individual). Instead, use Form W-9 to document your status as a U.S. person.

Section 263(1)(c), due-date table, entry 4

Any other assessee. 31st July.