401k withdrawal after r2i – does not mean transfer to India

401k withdrawal after r2i – does not mean transfer to India

Majority of the readers of my newsletter are either living in USA or returned to India from USA. It is taxing time for them. April 15th is the deadline to file tax returns in USA. Those who are living outside USA gets automatic extension to file tax return until June 15. But taxes due should have been paid by April 15th.

The ordinary due date (April 15) for US income tax returns of individuals applies to expatriate taxpayers as well, although there is an automatic extension of time for filing to June 15 is provided to expatriate US citizens and resident aliens who, on the normal due date of the return, are residing abroad. The filing extension does not apply to payment of tax.
Individuals who qualify for this automatic extension need not file any form with the IRS to obtain the extension but should simply attach a statement to their tax returns indicating that they qualify. It should be emphasized that the automatic extension of time for filing does not extend the time for payment of tax. Interest will be charged by the IRS on any unpaid balance of tax from the normal due date (April 15) until the date the return is filed, even if the due date is extended.

I like to remind the returnees not to miss the opportunity to start withdrawal from your 401k and IRA. The whole idea of saving in 401k is to get the tax savings. Now after your return to India, your taxable US income would have come down. Earned income from Indian business and job can be excluded using foreign earned income exclusion up to 91,000$. What is the better time than now to take the money out of IRA ? Why wait till 60 ?

One should not confuse between withdrawal of the money and expensing it. Also withdrawal does not mean the money need to be brought to India. The money can be removed out of 401k/IRA and can be invested in the same funds outside 401k/IRA. Also if the asset allocation plan demands, it can be brought to India and invested as per the plan.

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